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NATIONAL EXPORT
STRATEGY OF
SRI LANK A 2018-2022
The National Export Strategy (NES) of Sri Lanka
is an official document of the Government of Sri Lanka
Address: Level 30, West Tower, World Trade Centre, Colombo 01.
Phone : +94 (0) 112337629
Phone : +94 (0)112337627
E-mail : info@modsit.gov.lk
The National Export Strategy (NES) of Sri Lanka was developed on the basis of the pro-
cess, methodology and technical assistance of the International Trade Centre (ITC) within
the framework of its Trade Development Strategy programme.
ITC is the joint agency of the World Trade Organization and the United Nations. As part of the
ITC mandate of fostering sustainable development through increased trade opportunities, the
Chief Economist and Export Strategy section offers a suite of trade-related strategy solutions
to maximize the development payoffs from trade. ITC-facilitated trade development strategies
and road maps are oriented to the trade objectives of a country or region and can be tailored
to high-level economic goals, specific development targets, or particular sectors.
Technical assistance for the design of this document was provided by Charles Roberge,
Alexandra Golovko, Olga Khomula, Paul Baker, Yuki Mitsuka, Dominik Berger and Chullante
Jayasuriya.
Financial support was provided by the European Union, as part of the ‘European Union –
Sri Lanka Trade Related Assistance : Increasing SMEs’ trade competitiveness in regional and
European Union markets’ project. The contents of this document can in no way be taken to
reflect the views of the European Union.
The views expressed herein do not reflect the official opinion of ITC. Mention of firms, products,
and product brands does not imply the endorsement of ITC. This document has not been
formally edited by ITC.
The world economy has profoundly changed in recent years, presenting new
opportunities as well as challenges for Sri Lanka. The Government of Sri Lanka
is geared towards creating an enabling environment to strengthen the competi-
tiveness which is a key driver to achieve inclusive and sustainable growth of Sri
Lankan exporters.
In line with the Government’s vision of “building of a sustainable Sri Lanka, where
everybody will share its dividends”, I strongly believe the National Export Strategy
( NES ) will support the strengthening of the livelihood of all stakeholders in the
export supply chain while creating increased wealth for the nation.
I sincerely appreciate the work of all the stakeholders who were involved in the
process of formulating the National Export Strategy ( NES ).
Maithripala Sirisena
President of Sri Lanka
[ iii ]
Sri Lanka has a strong potential to enhance its external trade performance since
our brands are increasingly associated with high quality and ethical manufactur-
ing practices. In addition to the mature export sectors of apparel, tea, rubber
and coconut, exports of services such as ICT, tourism and logistics have grown
significantly in the last decade. These sectors have proven their ability to diversify
and access new market destinations.
The success of the NES relies on the ability of all public and private stakeholders
to coordinate activities, monitor progress and mobilise resources. It is crucial for
the public and private sectors to define the NES implementation modalities and
“Quick Win” activities to build momentum for implementation.
I am confident that the National Export Strategy will provide Sri Lanka with the
impetus and guidance to realise the country’s potential and drive the nation to-
wards achieving the target of USD 28 billion in export earnings by the year 2022.
Ranil Wickremesinghe
Prime Minister of Sri Lanka
[ iv ]
The NES consolidates national level findings and priorities into a coherent road-
map to achieve Sri Lanka’s export vision: “Sri Lanka an export hub, driven by
Innovation and Investment”. This vision is guided by four strategic objectives,
they are; creating a predictable and transparent policy and regulatory framework,
drive export diversification through innovation, strengthening emerging export
sectors by improving market entry and compliance capacities, and to be an
efficient trade and logistics hub.
The strategy consists of a Plan of Action for each sector and a framework to
monitor the implementation to reach the expected outcomes. My Ministry will
give the highest priority for the implementation of NES, based on the actions pro-
posed of which a few have already been included in the National Budget 2018.
Malik Samarawickrema
Minister of Development Strategies & International Trade
[v]
I have great pleasure in sending this message for the occasion where the EDB,
together with the Ministry of Development Strategies & International Trade and
the private and public sector stakeholders with the technical assistance from
the International Trade Centre ( ITC ), Geneva, has formulated the National Export
Strategy ( NES ) for Sri Lanka. We all witness today, a long felt need of the country
becoming a reality.
As the National Export Strategy has been formulated with close consultation of
all the stakeholders, every aspect for developing exports including minute details
and concerns to be addressed to reach the country’s export goals have been
very carefully looked into in this process. I am very much happy to be associated
with the development process of NES as the Navigator and as a stakeholder.
Having a strategy along would not produce tangible results. The implementation
on the lines recommended in the NES is of paramount importance to achieve
the set export objectives and it could only be achieved through concentrated, fo-
cused and committed efforts of all the stakeholders. As the Navigator of the NES,
a responsibility is incumbent upon me to make sure effective implementation.
I am happy to mention that the NES implementation is already in progress with
the establishment of sector specific Advisory Committees and the Government
has recognized the importance of NES and budget allocations have been made
for the identified activities of the priority sectors in the National Budget 2018.
Sujeewa Senasinghe
State Minister of International Trade
[ vi ]
A significant challenge faced by the export sector of Sri Lanka is to adopt initia-
tives that are compatible with global developments so as to improve performance.
Therefore a more conducive environment and strategy for exports to thrive, was
sorely needed. A strategic orientation coupled with a participatory approach
towards export development has been a high priority that the private sector
desires. It is in this context that we welcome the National Export Strategy ( NES ).
The NES provides a strategic orientation for Sri Lanka to achieve the dual objec-
tive of an export led economic growth trajectory and in making Sri Lanka a
regional hub of value-added exports. This aligns well with the strategic objectives
highlighted by the New National Trade Policy of Sri Lanka and the Vision 2025
articulated in the Policy Statement of the Government.
MESSAGE BY AMBASSADOR
– EUROPEAN UNION DELEGATION
TO SRI LANKA AND THE MALDIVES
The story of Sri Lanka's economic development over the last few years has been
very positive. The European Union has partnered with Sri Lanka for decades
through humanitarian assistance and post-tsunami support, and later through
development cooperation. The National Export Strategy is a part of the compre-
hensive 'EU-Sri Lanka Trade Related Assistance Project'–a EUR 8 million project
initiated on a request made by the Sri Lankan Government. Opportunities pro-
vided by the new and dynamic global trading environment have fuelled the need
for Sri Lanka to formulate policies that centre on assisting trade and improving
competitiveness. Trade is one of the most sustainable methods to reduce poverty
and drive development.
In Sri Lanka, as in many other countries, micro, small, and medium-sized en-
terprises are vital to the overall growth of the country, contributing to over 70%
of GDP. Medium and small enterprises, which account for a vast majority of
jobs and businesses, are an important test for checking the country's economic
growth and resilience. The aim of this strategy is to pool together lessons learnt
to shape a future where small and medium-sized enterprises can benefit from
trade export. The National Export Strategy combines learning from the past, while
exploring the future and its inherent unpredictability. I hope this Strategy will help
Sri Lanka to move forward with a clear purpose, promoting linkages between
various sectors and diversifying its export basket and target markets.
I also take this opportunity to acknowledge the leadership and ownership shown
by the Government of Sri Lanka in the production of this strategy. The imple-
menting partners of the EU-funded project, ITC and UNIDO, have also been
instrumental in bringing together expertise and knowledge as well as identifying
the steps to promote Sri Lankan trade.
Sri Lanka is on the cusp of transforming its export industry through the imple-
mentation of a National Export Strategy ( NES ). The visionary, pragmatic and
realistic recommendations of the NES will improve the operating environment
for all SMEs, develop incubating conditions for innovation, enhance capacities
for investment promotion, as well as expand Sri Lanka’s established excellence
of products and services to greater heights.
The commitment of the Government of Sri Lanka and the private sector to imple-
ment this key reform agenda has been visibly established since the inception of
the NES design process. Financial allocation in the national budget of 2018 for the
NES, highlights the earnestness of the Government for fast tracked implementa-
tion. The official appointment of Advisory Committees to coordinate the imple-
mentation process reaffirms the dedication of public and private partners to work
hand in hand in building Sri Lanka, as the next regional trade hub.
The NES is a living document that will stay relevant and vibrant to guide national
economic development. ITC will continue to work with Sri Lanka to ensure that
the NES objectives are attained rapidly to create a fresh era of prosperity and
growth for its people.
Arancha Gonzales
Executive Director
International Trade Centre
[ ix ]
Besides in-depth research and value chain analysis, these consultations were
complemented by:
Factory visits through which supply chain assessments were carried out to
gain further knowledge on key issues such as quality procedures, technical
skills, lean management, quality of raw materials, access to market, etc.
Interviews with domestic, regional and international buyers to guide the
NES with strategic insights and market intelligence as well as buyers’ require-
ments in terms of quality standards, food safety, packaging, buying cycles,
distribution channels, prices, etc.
Donor sensitization to identify synergies with ongoing/planned initiatives of
development partners to eventually result in collaboration during the imple-
mentation phase.
The NES is aligned to Sri Lanka’s development policy framework and will con-
tribute to achieve the ambitions of Vision 2025 and the New Trade Policy (NTP).
Vision 2025 of the Government of Sri Lanka, crystallizes the objective of Sri Lanka
to finally transition to an export-led era. Vision 2025 references the NTP as well as
the NES as the main tools towards the transformation of Sri Lanka into a regional
hub of high-value exports.
The principal outputs of the NES Sri Lanka design initiative are endorsed, co-
herent and comprehensive export strategy documents with five-year detailed
Plans of Action (PoAs) and implementation management frameworks. These
documents include:
1. A main NES document (the present document) which contains the overarching
national analysis. The NES design process provided the rationale for the selec-
tion of focus sectors and trade support functions (TSFs) based on ability to
achieve the vision. The NES diagnostics highlighted key national priorities for
improved competitiveness, such as a streamlined institutional and regulatory
framework, export finance and improved trade promotion. The main NES
aggregates and consolidates national priorities as well as major high-level
priorities from each sector/TSF into a coherent framework.
2. Individual NES priority sector strategies and TSFs packaged as separate
documents but in alignment with the main NES findings and overarching
strategic objectives. The stand-alone sector and TSF strategies focus on
their industry-specific priorities but also highlight cross-sector priorities such
as access to technology, development of industry clusters and linking industry
to academia. These cross-sector priorities are integrated in the main NES.
[x]
ACKNOWLEDGEMENTS
The NES of Sri Lanka was developed under the aegis of the Ministry of
Development Strategies and International Trade (MoDSIT) and the Sri Lanka
Export Development Board (EDB), with financial support from the EU as
part of the ‘EU–Sri Lanka Trade-Related Assistance: Increasing SMEs’ Trade
Competitiveness in Regional and EU Markets’ project.
The document benefited particularly from inputs and guidance provided by the
members of the public and private sector community that steered the formulation
of the NES. A NES Core Team was set up to lead the NES design process. Core
Team members are listed below.
A full list of public and private stakeholders that contributed their precious time
to the design of the NES can be found in appendix 1.
[ xv ]
CONTENTS
Message by His Excellency The President of Sri Lanka ii
Message by the Honourable Prime Minister of Sri Lanka iii
Message by Honourable Minister of Development Strategies and International Trade iv
Message by Honourable State Minister for International Trade v
Joint Message by the Private Sector Chambers and Associations vi
Message by Ambassador – European Union Delegation to Sri Lanka and the Maldives vii
Message by Executive Director of International Trade Centre viii
Acknowledgementsxi
EXECUTIVE SUMMARY 1
VISION AND STRATEGIC OBJECTIVES 2
MOVING TO ACTION 35
THE STRATEGIC FRAMEWORK 35
CONCLUSION : IMPLEMENTATION HAS ALREADY STARTED WITH THE 2018 NATIONAL BUDGET 39
LIST OF FIGURES
LIST OF TABLES
Table 1 : Number of products identified per sector at Harmonized System 6 level with export potential 78
ACRONYMS
ASYCUDA Automated System for Customs Data MoDSIT Ministry of Development Strategies
B2B Business-to-business and International Trade
BOI Board of Investment of Sri Lanka MoF Ministry of Finance
BPM Business process management MoNPEA Ministry of National Policies and Economic
CAB Conformity assessment body Affairs
CBSL Central Bank of Sri Lanka MoPS Ministry of Ports and Shipping
CCC Ceylon Chamber of Commerce MUSSD Measurement Units, Standards and
CSC Committee on Singapore’s Services Department
Competitiveness NCE National Chamber of Exporters of Sri Lanka
DoC Department of Commerce NES National Export Strategy
EDB Sri Lanka Export Development Board NQC National Quality Council
EEC Electrical and electronic components NQI National Quality Infrastructure
EU European Union NTP National Trade Policy
FDI Foreign direct investment PoA Plan of Action
GDP Gross domestic product R&D Research and development
GI Geographical indication SLAB Sri Lanka Accreditation Board
I&E Innovation and entrepreneurship SLSI Sri Lanka Standards Institution
IP Intellectual property SME Small and medium-sized enterprise
IT Information technology TSF Trade support function
ITC International Trade Centre UNIDO United Nations Industrial Development
ITI Industrial Technology Institute Organization
LCL Less than Container Load WB World Bank
MCC Multi-cargo consolidation
Photo : (cc) pixabay
1
EXECUTIVE SUMMARY
Connecting Asia to both Europe and Africa, Sri Lanka is for Sri Lanka to modernize and start a new cycle of export
well-positioned to participate fully in global production growth. The NES will enable the country to realize its full po-
networks and export to billions of consumers, both region- tential as an inevitable regional trade hub and a beacon of
ally and beyond. The increasing sophistication of Sri Lankan trade openness.
processing techniques, the fast growth of the services in-
dustry and the emergence of visionary industries are con- Sri Lanka now has the opportunity to catch up to fast-
tributing to making the country the next trade hub of the growing Asian exporting countries. Although positive
Indian Ocean. trends in the past five years have stimulated export growth,
key upgrades are required to reverse the long decline in
The NES is a timely catalyst through which the export share of exports to gross domestic product ( GDP ). Currently,
sector will be reshaped. The NES is aligned to Vision 2025 Sri Lankan export engines rely on a blend of traditional in-
and the NTP, and all aim to stimulate growth and job crea- dustries and growing services sectors. The NES will empow-
tion by improving the ability of firms to export and compete er the emergence of new champions beyond the traditional
in foreign markets. The NES builds on consensus from the export industries of apparel, tea, gems and rubber. High tar-
entire export community about the upcoming tasks and the iffs, complicated administrative procedures and challenging
heaviest roadblocks to be dislodged. It defines a detailed access to inputs will be addressed to favour the growth of
road map for faster export growth and acknowledges that higher-technology and knowledge-intensive exports, which
things need to be done differently to increase the contribu- are less vulnerable to cost shifts. NES implementation will
tion of trade to economic development. address major systemic issues hindering the rapid expan-
sion of Sri Lanka’s exports.
The time to transform the export sector is now. The cur-
rent wave of economic reforms for a more transparent and To seize the window of opportunity, Sri Lanka’s NES pro-
flexible business environment, combined with increasing re- poses a clear-cut strategic orientation to drive the reforms
gional trade opportunities and major transformations in pro- needed for Sri Lanka to reach its potential.
duction techniques, provide a unique window of opportunity
The NES design process rationale for selection of focus sectors and The stand-alone sector and TSF strategies focus on their industry-
TSFs was their ability to achieve the vision. The NES diagnostics specific priorities but also highlight cross-sector priorities such as
highlighted key national priorities for improved competitiveness, access to technology, development of industry clusters and linking
such as a streamlined institutional and regulatory framework, export industry to academia. These cross-sector priorities are integrated
finance and improved trade promotion. The main NES aggregates in the main NES.
and consolidates national priorities as well as major high-level
priorities from each sector / TSF into a coherent framework.
[ Executive summary ]
2
“
Sri Lanka – an export hub driven
”
by innovation and investment
To To To
have a business strengthen drive export
To become an
enabling, predictable Sri Lankan diversification
efficient trade and
and transparent policy exporters’ through
logistics hub
and regulatory market-entry innovation and
to facilitate exports
framework that supports and compliance by strengthening
exports capacities emerging sectors
STRATEGIC OBJECTIVES The trade information and promotion priorities of the NES
strive to improve data collection, analysis and dissemina-
1. To have a business-enabling, predictable tion between key institutions – such as EDB, the Department
and transparent policy and regulatory framework of Commerce ( DoC ), the Central Bank of Sri Lanka ( CBSL ),
that supports exports. private sector chambers and others – in order to create a
unique platform for exporters to easily access relevant, up-
The private sector, including small and medium-sized en- to-date and affordable market intelligence. This objective
terprises ( SMEs ), considers this objective fundamental to equally strives to focus trade promotion efforts in line with
address challenges faced by Sri Lankan enterprises, re- industries’ priorities by increasing engagement with trade
duce costs of doing business and improve export com- missions, creating a genuine Sri Lankan brand, and ensuring
petitiveness. It focuses on re-engineering processes for exporters’ brands are protected by strengthening targeted
improved institutional coordination, streamlining adminis- intellectual property ( IP ) processes.
trative procedures and deepening the digitization of trade-
related processes. The strengthening of the NQI function will give national in-
stitutions increased ability to effectively support SMEs’ and
To achieve this objective, the main NES PoA favours the es- exporters’ compliance with market requirements and stand-
tablishment of an institutional public and private coordination ards. The NQI Strategy provides an actionable road map to
mechanism for trade policy design, formulation and execu- implement the National Quality Policy and improve coordi-
tion. This key action aims to increase transparency and coor- nation between the Sri Lanka Standards Institution ( SLSI ) ;
dination between key partners to avoid ad hoc policymaking Measurement Units, Standards and Services Department
and duplication of efforts. ( MUSSD ) ; Sri Lanka Accreditation Board ( SLAB ) ; Consumer
Affairs Authority, conformity assessment bodies ( CABs ) and
This objective equally prioritizes updating Sri Lanka’s regu- other institutions responsible for ensuring quality of prod-
latory environment by amending and reviewing a number ucts. This objective will also make testing, adherence to
of regulations – including the Quarantine Law, Customs Act standards and traceability more affordable and accessible,
and import regulations – to streamline trade procedures and thereby contributing to better protection of Sri Lankan con-
allow the country to become an effective trade hub. The sumers as well as market entry for exporters.
gazetting of the Electronic Transactions Act or the amend-
ment of the Board of Investment ( BOI ) Law will reinforce the
attractiveness of the country as an efficient place for doing 3. To become an efficient trade and logistics hub
business. to facilitate exports.
This objective also highlights the need for improved export fi- This objective is critical for Sri Lanka to become a recog-
nance and insurance solutions, and recommends increased nized hub serving Asia and the world. It aims to create the
involvement of the private sector in trade negotiations. conditions for Sri Lanka to leverage its enormous shipping
and logistics potential by strengthening its infrastructure, im-
proving services and attracting the investment and skills re-
2. To strengthen Sri Lankan exporters’ market-entry quired for sustainable growth.
and compliance capacities.
This objective will be achieved through a dual approach of
This strategic objective focuses on strengthening two key increasing transhipment, multi-cargo consolidation ( MCC )
TSFs that deliver trade information and promotional sup- and commercial hub activities for international shipments ;
port, and quality compliance services, both necessary simultaneously ensuring improved services for Sri Lanka’s
to increase exporters’ performance in destination mar- own transport and exports of goods. A key focus of the
kets. The improvement of the trade information and promo- Strategy is reforming the logistics ecosystem by adjust-
tion function and the strengthening of the National Quality ing key regulations such as the Sri Lanka Port Authority
Infrastructure ( NQI )1 will benefit SMEs, emerging exporters Act, the Electronic Transactions Act and Commercial Hub
and mature export industries of Sri Lanka. Regulations to favour increased sophistication and quality of
services. The NES also recommends provision of adequate
facilities, such as warehouses, bonded logistics centres and
common user facilities, as well as improved rail connections
between ports and airports, in order to increase storage ca-
1.– A stand-alone NQI Strategy was developed on the basis of the National
pacities, facilitate e-commerce operations, attract more tran-
Quality Policy – approved by the Cabinet in November 2016, the Sri Lanka shipment and increase overall capacity.
NQI Gap Assessment completed by the World Bank, and the technical
guidance of UNIDO. The NQI Strategy was designed with the technical
assistance and methodology of ITC.
[ Executive summary ]
4
Photo: © advantis.world
The achievement of this objective depends and builds on In order to capitalize on the potential of these emerging ex-
Sri Lanka’s World Trade Organization trade facilitation ob- port sectors, the NES focuses on implementing vital national
ligations implemented by the National Trade Facilitation solutions, while equally targeting industry-specific interven-
Committee and supported by various development part- tions. This dual approach to sector development ensures
ners. Recognition of Sri Lanka as a logistics hub depends that all priority actions – including regulations, industry coor-
partly on the implementation of a single window system, dination and market development – are properly addressed
the rolling out of e-payment solutions and the efficiency of to drive growth in each priority sector. The NES focuses on
border agencies. reinforcing new export industries by proactively improving
the provision of skills to support these industries’ growth ; at-
tracting investment, technologies and knowledge into these
4. To drive export diversification through innovation promising sectors ; and supporting integration of SMEs from
and by strengthening emerging export sectors. across Sri Lanka into the export value chain.
This strategic objective will create the conditions and Innovation is critical for the diversification of Sri Lankan ex-
implement targeted solutions to develop visionary and ports. Because innovation creates effects beyond the ex-
emerging export sectors. Established export sectors such port sector, an independent working group of public and
as apparel, tea, rubber and coconut products have proven private stakeholders was appointed by the Prime Minister to
their ability to compete in world markets.2 While these ma- design a stand-alone strategy for innovation and entrepre-
ture sectors are the backbone of Sri Lanka’s export perfor- neurship ( I&E ).3 The implementation of this I&E Strategy will
mance, enablement and strengthening of new industries is support the NES priority to reorient research and develop-
a priority to enable faster export growth. ment ( R&D ) and innovation to support the needs of emerg-
ing export sectors.
2.– These sectors are driven by strong private sector ownership and
built on the sectors’ competitive advantages. The rubber sector has the
Sri Lanka Rubber Industry Master Plan 2017–2026 and the textiles sector is 3.– The I&E Strategy of Sri Lanka was developed independently of the
developing its own new sector strategy. Other important sectors with high NES, by MoDSIT, with technical assistance from the World Bank. The
export potential, such as fisheries, are already receiving support to develop NES and I&E Strategy jointly contribute to build innovation in exports and
strategically. entrepreneurship of SMEs.
[ Executive summary ]
6
The 2018 National Budget has allocated resources to stakeholders. The implementation structure did not require
national institutions to fast-track implementation of NES regulatory or legislative amendments ; it works within the ex-
priorities. Quick-win activities ranging from regulatory up- isting legal framework of Sri Lanka.
grading, enabling SME participation in exports, strengthen-
ing visionary sectors and increasing promotion of Sri Lankan Export advisory committees, composed of private and
products were prioritized for rapid implementation. This con- public sector representatives, are mandated to steer the
firms the Government’s commitment to rapidly transform and development of a specific export industry in a strategic
upgrade Sri Lanka’s export sector.4 manner. The Export Development Act ( 1979 ) grants EDB the
following power : ‘On advice from the Board, the Minister may
In order to fast-track implementation, it was essential to by Order in the Gazette establish advisory committees for
ensure the necessary conditions for implementation and the development and promotion of certain products, prod-
coordination were rapidly operational. With this in mind, the uct groups and commodities as well as functional aspects
Government and private sector representatives have agreed of trade’.
on a NES governance structure that became operational in
early 2018. Export advisory committees were revamped, reorganized
and given further influence by the Government to strategi-
The NES implementation and coordination mechanisms cally guide their industry’s development. The Committees
will support and guide implementing partners in program- were operational in early 2018 and are already guiding the
ming and delivery of priority projects. A coherent and re- implementation of their respective sector or TSF strategy.
sourced coordination structure will ensure that national trade
development efforts do not occur in isolation and are aligned A NES Management Unit is operational to coordinate and
to priorities defined by national policymakers and industry monitor implementation of the NES. The NES Management
Unit reports to the Secretary of MoDSIT and is primarily re-
4.– The list of 2018 National Budget proposals contributing to NES sponsible for ensuring the PoAs adopted under the NES are
implementation is in appendix 2. implemented in a timely and effective manner.
A key recommendation of the vast majority of the 556 participants The membership is to be appointed in a transparent manner. The
of the NES design process was to ( re )establish a high-level formal high-level trade council is to be chaired by the President / Prime
public–private council responsible for coordinating all trade devel- Minister. Its key objective is to reduce ad hoc trade policymaking
opment interventions, including the NES, and reduce duplications and oversee the implementation of trade-related initiatives.
among trade-related institutions. ( see main NES PoA – 1.1.1 ).
The NES will unlock the development of nascent export The NES will allow Sri Lanka to become a regional trade
sectors, thereby providing entire new job opportunities. hub, which will attract foreign investment to the country
The NES will put in place all conditions required for ex- and spur economic development.
isting value added industries to boom through exports, The NES will ensure inclusion of regions by connecting
favouring retention of value in the country and generat- all initiatives to local production centres.
ing new skills locally. The NES will streamline legal and administrative pro-
The NES will facilitate the entry of SMEs into exports cedures, reducing complexity for businesses to operate.
by easing bureaucratic procedures and through targeted
support, including trade finance solutions.
60 10.000
40 5.000
20 0
2000 2002 2004 2006 2008 2010 2012 2014 2016
0
India Viet Nam
2000
2002
2004
2006
2008
2010
2012
2014
2016
Photo: ITC
Although Sri Lanka has experienced rapid growth and re- an increase in domestic consumption, as well as the growth
duced poverty, the engines that pulled the economy have on non-export industries such as construction and public
started to falter, pointing to a pressing need for replace- sector spending. The slowdown of economic growth clear-
ment. Between 2013 and 2016, annual real GDP growth ly demonstrates that domestic demand cannot be the only
slowed to an average of 4.4 %.7 This slowdown can be ex- source of growth, especially considering the limited size of
plained by the nature of the components of the previous the domestic market. Another key indicator is the current ac-
growth. Since 2000, Sri Lanka’s economy has been led by count deficit of the balance of payments, which has been
negative since 1975, and amounted to negative US $ 2.01
7.– ITC calculations based on World Bank data, 2017. billion in 2015.
Figure 2 : Sri Lanka’s current account balance com- Figure 3: Sri Lanka’s external debt ratio compared
pared with regional peers, 2000–2014 with regional peers, 2001–2016 (per cent)
( US $ billions )
50 300
Percentage of exports of goods, services and
40 250
30 200
US$ Billions
20
150
primary income
10
100
0
50
-10
-2,01 0
-20
2001
2006
2008
2010
2011
2012
2013
2014
2015
2016
Expansion of high-value exports emerges as an inevitable The strategic location of Sri Lanka at the crossroads be-
path for Sri Lanka to achieve its sustainable growth goals. tween the area covered by the South Asian Association
Trade and current account deficits, as well as the reliance on for Regional Cooperation and South-East Asia, the fast-
high levels of foreign borrowing can mainly be addressed est-growing regions in the world, gives the country all the
through increasing export revenues. Higher export revenues right conditions for exports to boom and for the country to
are a solution to increase Sri Lankan resilience in regard to become a beacon of openness. Sri Lanka is close to many
its foreign liabilities, as well as to stabilize exchange rate emerging markets and is already an important transhipment
fluctuations. Besides these considerations, increased trade hub for the region. Previous sector development was mainly
revenues have the potential to generate investment inflows concentrated on hard infrastructure – driven by many govern-
into new areas and new technologies, increase productiv- ment policies and support from international partners – in-
ity, create jobs and strengthen the skills of the Sri Lankan cluding projects such as the Urban Transport Master Plan for
labour force. Colombo Metropolitan Region and Suburbs, megaprojects
like the development of the Mattala Rajapaksa International
Airport and Hambantota Port, and national master plans for
ports, railways and roads.
Although Sri Lanka has taken a major socioeconomic leap over the last decade, GDP
growth was mostly driven by public sector expenditure and domestic consumption. Trade
has made a limited contribution to this growth, which suggests that the traditional growth
engines are no longer sustainable. The country needs to revise its growth development
strategy for the future.
Figure 5 : Sri Lankan trade in goods and services, Figure 6 : Trade to GDP regional comparison,
2000-2016 ( US $ billions ) 2001–2016 ( percentage of GDP )
25 100
90
20 80
70
Percentage of GDP
15
Current billion US$
60
10 50
40
5 30
20
0
10 21,4
-5 0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
-10
2000 2002 2004 2006 2008 2010 2012 2014 2016
Sri Lanka Thailand
Trade balance Exports Imports Viet Nam India
Source : ITC calculations based on Comtrade and World Bank World Development Indicators data, 2017.
However, these positive signs are counterbalanced by from 141 % in 2000 to 265 % in 2016.9 While neighbouring
the fact that export growth starts from a very low base. countries such as Viet Nam, Thailand and Indonesia have
Sri Lanka remains a marginal exporter in the region, with succeeded in reducing their external debt ratio since 2000,
a world export share that stagnated between 0.08 % in Sri Lanka has become the country with the greatest debt to
2001 and 0.07 % in 2016. Other economies, such as India, export ratio in South Asia.
Thailand, Indonesia and Viet Nam, have successfully in-
creased their export share during the same period, while Another warning sign when it comes to export growth is the
already starting with a much higher share of world exports. continuously decreasing contribution of exports of goods
and services to Sri Lanka’s GDP, from 39 % in 2000 to 21.4 %
The trade deficit has also remained unchanged and has in 2016. This contrasts with key regional competitors such
even been aggravated, leading to accumulation of the as Viet Nam and Thailand, which steadily increased their ex-
debt required to finance the balance-of-payments short- port share to GDP ratio during the same period. This trend
falls. Sri Lanka’s trade balance deficit remains substantial, illustrates that Sri Lanka’s export growth is too feeble to be
and increased from US $ 0.7 billion in 2001 to US $ 8.9 bil- able to remain a key contributor to GDP.
lion in 2016.8 This led to a rise in the ratio of debt to exports
Figure 7 : World export share, comparison with region- Figure 8 : World export index, comparison
al peers, 2000–2015 ( percentage of world exports ) with regional peers, 2000–2015
1,80 1200
1,60 1000
1,40
% OF WORLD EXPORTS
1,20 800
1,00
INDEX
0,80 600
0,60 400
0,40
0,20 200
-
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
India Thailand
Indonesia Viet Nam Viet Nam India Thailand
Sri Lanka Indonesia Sri Lanka
Currently, Sri Lankan export engines rely on a blend of tra- Sri Lanka has increased its exports of electrical machinery,
ditional industries and growing services sectors. In 2016, gems and processed food products such as coconut prod-
the export sector consisted mainly of apparel ( 26 % ), travel ucts. Meanwhile, Viet Nam has not only multiplied tenfold
services ( 20 % ), transport services ( 13 % ), tea and spices the value of its exported goods and services but also de-
( 9 % ), and rubber ( 5 % ). Sri Lanka doubled its export val- veloped its support industries and contiguous sectors, and
ue by intensifying exports of traditional industries rather increased its modern, high value added production, includ-
than through export diversification. However, more recently, ing high technology, chemicals and other industries.
Even though exports of goods show limited diversifi- came from the travel, and information and communications
cation, the services sector has been evolving more dy- technology industries, with 24 % and 18 % annual growth be-
namically, becoming one of the drivers of recent export tween 2006 and 2016 respectively. The transportation sec-
performance. In absolute terms and compared with 2005, tor enjoyed 12 % annual growth over the same period. The
Sri Lankan exports of services quadrupled to US $ 7.1 billion travel industry overtook transportation services in 2014 and
in 2016. In relative terms, service exports increased from became the largest service export, culminating at US $ 3.5
4.7 % of GDP in 2011 to nearly 8 % in 2015. The services billion today. Recently, financial, insurance and pension – as
sector also enjoyed a trade surplus, which stood at US $ 2.3 well as construction – services have gained, but still play a
million in 2015. Within services exports, the greatest growth less significant role in overall Sri Lankan exports of services.
8000
7000
6000
5000
4000
3000
2000
1000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
The main goods’ export destinations remained relatively destinations did not change, while their total share de-
unchanged over the past decade, showing limited over- creased by 9 %. Current global trends in market development
all market diversification. In 2016, Sri Lanka’s top export will be relevant for future Sri Lankan exports. The foreseen
destinations were the United States of America ( 27 % of to- granting of the EU Generalized System of Preferences+,
tal exports in goods ), the United Kingdom of Great Britain Brexit, the Trans-Pacific Partnership and prospering Asian
and Northern Ireland ( 10 % ), India ( 7 % ) and Germany markets are all changing Sri Lanka’s positioning in the inter-
( 5 % ). Compared to 2005, the ranking of the top four export national trade environment.
Other USA
27% 27%
Australia
2%
France
2% UK
Iran 10%
2% Canada
2% Japan India
Russian Fed. 2% 7%
2% Netherlands China UAE Germany
Belgium Italy
2% 2% 3% 5%
3% 4%
Even though market diversification remained modest, As already indicated, Sri Lanka needs to overcome sys-
Sri Lanka’s new markets mostly emerged in Asia rather temic challenges to diversify its export industries. The vast
than Europe over the last five years. The greatest growth of majority of export growth can be attributed to intensifica-
exports between 2012 and 2016 was in the Chinese ( 23 % ), tion of existing product categories and market relationships.
Indian ( 8 % ), American ( 7 % ), Canadian ( 7 % ) and Emirati Around 32 % of the export growth in goods can be attributed
( 7 % ) markets. European destinations have generally been to already existing products exported to new markets. Only
shrinking since 2011 as a share of Sri Lanka’s total exports. 2 % of export growth resulted from new products exported to
This confirms the ability of mature export sectors to expand existing markets. Growth attributed to new products reaching
their market reach. For example, tea is exported to 111 coun- new markets ( full diversification ) was negligible.
tries, while apparel is exported to around 90 countries.
1.00%
0.50%
-0.32
-0.00 -0.02
0.00%
-0.30
-0.50%
-0.57
This difficulty in diversifying export products and markets Sri Lanka continues its path towards higher middle-income
is in part linked to the fact that exports tend to be concen- status, which goes hand in hand with more increases in the
trated in low-technology, labour-intensive segments which cost of labour. The challenge of improving productivity ( e.g.
are vulnerable to cost shifts. It also reflects the sustained through higher capital endowment or demand-driven tech-
decrease in relative manufacturing exports and high-tech nical and vocational education and training programmes )
manufacturing exports caused by the high cost of imported is becoming a key challenge that needs to be addressed in
inputs and a weak national innovation system. This devel- order for Sri Lanka to stay competitive.
opment will become even more pronounced in the future as
Commodities
MediumTechnology Manufactures
HighTechnology Manufactures
Other Transactions
Not classified
2000-05
2005-10 0 500 1,000 1,500 2,000
It is still challenging for SMEs – which account for 80 % Exports of manufactured products have overall experi-
of all businesses in Sri Lanka, provide 45 % of employ- enced a low during the past 15 years but almost came
ment and contribute 52 % of GDP – to engage in exports. back to their 2000 level in 2015 at 76 % of all Sri Lankan
Sri Lanka recognizes SMEs as the backbone of the econo- exports. During the same period, regional competitors such
my10 but they face challenges competing with certified qual- as Viet Nam and Thailand increased their manufacturing ex-
ity products, connecting with foreign buyers, and adapting port share. Domestically, increases in manufacturing value
to constantly evolving global technologies and production addition, which almost doubled between 2000 and 2015,
methods.11 These difficulties affect SMEs’ capacity to de- contributed the most to GDP.12 Internationally, according
velop new products as well as to diversify export destina- to the United Nations Industrial Development Organization
tion markets. Many SMEs use outdated technologies and ( UNIDO ) Industrial Performance Index,13 in the past 15 years,
equipment, leading to higher production costs, waste and
lower productivity. Insufficient management capacity, busi-
ness knowledge and support programmes to guide enter- 12.– Based on UNIDO ( 2017 ). UNIDO Statistics data portal. Available from
http ://stat.unido.org/#. Accessed 31 October 2017.
prises on productivity improvement limit the development of
13.– The Industrial Performance Index makes calculations based on :
many Sri Lankan SMEs. 1.Manufacturing value added per capita ; 2. Manufacturing export per
capita ; 3. Share of Medium-high and high technology ( MHT ) activities
in total manufacturing value addition ; 4. Share of manufacturing value
10.– Sri Lanka, Ministry of Industry and Commerce ( n.d. ). National addition in GDP ; 5. Share of MHT manufactures exports ; 6. Share
Policy Framework for Small Medium Enterprise ( SME ) Development, p.1. of manufactures export in total exports ; 7. Share of the country in
Colombo. world manufacturing value addition ; 8. Share of the country in world
11.– ITC ( 2016 ). SME Competitiveness Outlook : Meeting the Standard manufactures exports. For more details, see : Upadhyaya, Shyam ( 2013 ).
for Trade. Geneva. Available from www.intracen.org/uploadedFiles/ Composite measure of industrial performance for cross-country analysis.
SMECO2016.pdf. Vienna : UNIDO.
Figure 14 : Industrial Performance Index, comparison Figure 15 : Manufactured goods - proportion of
with regional competitors, 2005–2015 exports, comparison with regional competitors,
2005–2015
0,18 90%
0,16 85%
0,14 80%
0,12 75%
0,10
Index
70%
Percentage
0,08 65%
0,06 60%
0,04
55%
0,02
50%
0,00
45%
20002002200420062008201020122014
40%
India Thailand 2000 2002 2004 2006 2008 2010 2012 2014
Source : ITC calculations based on UNIDO statistics and World Bank World Development Indicators, 2017.
Compared with its neighbours, Sri Lanka has not been in 2016, showing a recovery for the first time since 2011.15
successful in tapping into foreign direct investment ( FDI ) The sectors that have attracted the highest level of FDI ( capi-
as a source of capital and innovation. In fast-growing tal investment ) are logistics, transportation and warehousing,
newly industrialized countries, FDI plays a major role in financial services and tourism services. Manufacturing has
stimulating fast dynamic economic growth and export de- failed to attract significant levels of FDI. The highest level of
velopment.14 Sri Lanka’s FDI inflows stood at US $ 898 million job creation through FDI was recorded in the apparel, con-
struction and tourism services sectors.
Figure 16 : Net FDI inflows to Sri Lanka ( balance of Figure 17 : FDI as a percentage of GDP, comparison
payments ), 2000–2016 ( current US $ millions ) with regional competitors, 2000–2016 ( per cent )
1.200 12,0%
10,0%
1.000 898
8,0%
800 6,0%
US$ MILLIONS
600 4,0%
2,0%
400
0,0%
2000
2002
2004
2006
2008
2010
2012
2014
2016
200
Factors which explain the challenging performance of in- the institutional structure, roles and functions of the relevant
vestment attraction include the unpredictability of the trad- agencies.16 Moreover, the application of policies has been
ing environment and the limited transparency of policies. highlighted as being ad hoc in nature. The BOI one-stop
This makes Sri Lanka a less attractive investment destination shop has been established but is not yet fully operational17
and limits the willingness of national enterprises to upgrade and investment-related information remains insufficient.
production lines. Some of the critical challenges in attract-
ing FDI include the absence of a clear investment policy and 16.– World Bank Group ( 2016 ). Enhancing Competitiveness in Sri Lanka.
state-of-the-art investment legislation designed according Washington D.C., p.27.
to international best practices and that clearly articulates 17.– World Trade Organization ( 2016 ). Trade Policy Review – Report by the
Secretariat. Sri Lanka. WT/TPR/S/34. Geneva.
Figure 18 : Capital expenditures 2003–2017 by industry clusters ( total : US $ 19.34 billion )
Other
Food, Beverages Transportation,
10%
& Tobacco warehousing…
4%
Physical Sciences
6%
ICT & Electronics Financial Services
6% 16%
Transport
Equipment
7% Construction Tourism
9% Energy 13%
10%
Although exports have maintained stable growth over the past dec- in low-technology, labour-intensive segments which are vulnerable
ade, systemic issues limit rapid expansion of Sri Lanka’s exports, to cost shifts. SMEs, which account for 80 % of all businesses in
which is reflected in the stagnation of the country’s world export Sri Lanka, still face numerous challenges to engage into exports,
share, among other indicators. Currently, Sri Lankan export engines which strongly limits export diversification potential. In addition,
rely on a blend of traditional industries and growing services sec- compared to its neighbours, Sri Lanka has not successfully tapped
tors. On the industry and manufacturing sides, Sri Lanka has not into FDI as a source of capital and innovation.
been able to diversify away from its traditional export industries,
These systemic challenges create a situation where exports are not
i.e. apparel, tea and rubber. The difficulty diversifying exports is
growing fast enough to be able to remain a strong contributor to the
due to a number of factors, including exports being concentrated
economic growth of Sri Lanka.
“
to be dislodged. It defines a detailed road map for faster
export growth and acknowledges that things need to be
Become a beacon of openness
”
done differently if trade is to contribute more to economic
development. and finally enable the export ‘boom’
The NES is in line with specific chapters under Vision 2025. Vision 2025 comes after a succession of opposing eco-
The following elements are the main points of synergy be- nomic and fiscal policies. The first generation of economic
tween the NES and Vision 2025 : and social reforms brought trade liberalization to Sri Lanka’s
economy from 1977. These important reforms largely defined
The Government’s the current institutional, policy and regulatory framework
economic vision : structuring the country’s trade agenda. However, between
Vision 2025 speci- 1999 and 2009, successive Governments introduced reg-
fies that it aims to ulatory reforms that negatively impacted the openness of
transform Sri Lanka Sri Lanka’s trade regime. The successively opposing eco-
into an export-ori- nomic and fiscal policies of the past 25 years created a com-
ented economic plex trade and business environment that has constrained
hub at the centre of the competitiveness of Sri Lankan exports, creating high
the Indian Ocean, Government debt required to finance growth and crowding
with a knowledge- out investment in innovation. It is now time for a new wave
based, highly competitive, social-market economy. The of reforms in favour of openness and commerce.
development of Sri Lanka as a trade and logistics hub is
at the centre of the NES.
Addressing constraints on growth : Vision 2025 also men- THE WELL-KNOWN CONSTRAINTS
tions the need to reverse all remnants of protectionist THAT REQUIRE URGENT ACTION
policies and remove key regulatory barriers. The NES pri-
oritizes the barriers be removed and adjusted in its PoA. The main constraint to export competitiveness is a com-
New approach to growth : Vision 2025 aims to introduce plicated business environment and institutional set-up.
supportive legal reforms, including setting up a land The fragmented institutional network, costly export proce-
bank. These measures are also included in the NES be- dures and delays in introducing key solutions ( such as a
cause they will benefit exporting industries. single window or a land bank ) are some of the constraints
Improvement of the growth framework : The business which have been impeding export development for decades.
environment of Sri Lanka is one of the main areas of in- While neighbouring countries have managed to take off,
tervention under Vision 2025, which again aligns with Sri Lanka’s export development has remained timid due
the NES. Areas of convergence include upgrading to these and other aforementioned persistent constraints.
Sri Lanka’s ranking in the Doing Business classification,
a review of investment incentive policies, the integration Verité, the Institute of Policy Studies, McKinsey and the
of SMEs into the formal sector, and development of the World Bank have also provided valuable insights into the
logistics hub and services sectors, including tourism. constraints and opportunities for export development and
Technology and digitization : The Vision will favour invest- diversification. The vast majority of studies point towards
ment in the information and communications technology a fragmented regulatory and policy environment, which in-
industry, and digitization of government operations. Both cludes complex protectionist measures and a fragmented
of these are also prioritized in the NES. institutional environment that does not fully service the needs
Strengthening coordination and monitoring implemen- of exporters.
tation : Vision 2025 clearly mentions institutional coordi-
nation and management of implementation as a major The ITC SME Competitiveness Outlook of 2016 provides an
weakness for Sri Lanka. The NES has a clear governance overview of firm-level constraints. It is clear that for firms,
structure and roles and responsibilities, as well as an im- and especially SMEs, the main issues are the capacity to
plementation tracking system. connect and change. These issues are related to outreach
capacities of firms as well as their capacity to innovate their
production base. These will be analysed in further depth in
the review of competitiveness constraints below.
The NES builds on findings and complements them with the testi- the constraints preventing Sri Lanka from becoming a regional
mony of entrepreneurs collected through the consultative Strategy trade and logistics’ hub ; and export diversification and innovation
development process. The constraints identified are structured along constraints. These four main areas were instrumental to defining the
the four main axes that the Strategy will address, namely : policy major strategic objectives of the NES.
and regulatory issues ; market entry and compliance bottlenecks ;
International quality
certificate
100,0
Foreign technology licences Bank account
75,0
50,0
Formal training programme Capacity utilization
25,0
0,0
Investment financed by
Manager's experience
banks
• The fragmented institutional network, both public and pri- • Delays in defining operational guidelines to implement
vate, leads to complicated, delayed and often costly export new / updated regulations / legislation ( Merchant Shipping
procedures. Act, etc. ).
• Unstructured public–public and public–private coordination • Certain industries particularly suffer from remnants of trade-
leads to inconsistent, ad hoc policies and uncertainty for averse policies.
exporters and investors. • Limited availability and performance of modern export credit
• Delays in introducing trade-enabling key solutions ( automa- insurance.
tion, single window, land bank ).
The fragmented institutional network, both public and pri- ( with their peer organizations ). This leads to obvious ser-
vate, leads to complicated, delayed and often costly ex- vice overlaps and creates a complex environment. This
port procedures. Businesses in Sri Lanka face a complex particularly affects SMEs that have insufficient capacity to
web of public institutions, resulting in a fragmented, some- understand and navigate within this framework, which is not
times incoherent and contradictory policy framework. In mul- harmonized with international standards and best practices.
tiple instances, there is more than one institution responsible This complex business environment increases operational
for a specific support function. Institutions also tend to coor- costs for SMEs and exporters, creates delays in exports and
dinate vertically ( with their lead ministry ) and not horizontally discourages informal enterprises from formalizing.
Unstructured public–public and public–private coordina- Certain industries particularly suffer from remnants of
tion leads to inconsistent, ad hoc policies and uncertain- trade-averse policies. An identified anti-trade bias in tar-
ty for exporters and investors. As mentioned, institutions iffs and taxes raises the price of inputs and protects certain
tend to coordinate in a vertical manner rather than horizon- national industries from international competition, imped-
tally. In addition, there is insufficient public–private coor- ing Sri Lanka’s development of internationally competitive
dination occurring, specifically when developing policies. sectors. Furthermore, trade policy formulation, as well as
Supportive policies, such as Sri Lanka’s competition policy enforcement, remains fragmented, occasionally lacks coher-
and the Electronic Transactions Act, have not yet been able ence and is often not harmonized with internationally adopt-
to create a conducive business environment that support ed standards and best practices. This complex regulatory
SMEs. Many policies are considered either ineffective or bi- framework, together with costly processes, prevents many
ased against the interests of an open, competitive economy. SMEs from competitively participating in trade and benefit-
As an example, SMEs are not able to fully embrace the op- ing from existing support programmes.
portunities of e-commerce due to online financial services
such as Paypal not being accessible in the country. Limited availability and performance of modern export
credit insurance. Awareness among exporters ( especial-
Delays in introducing key solutions ( automation, single ly SMEs ) of the types of export finance solutions available,
window, land bank ). A number of initiatives have been pro- and their costs and benefits, is low. In addition to the cost
posed for many years but have never been implemented, of finance, this low level of awareness is another reason for
despite being crucial for export development. This is par- the low demand for and use of export finance. Exporters
ticularly the case with the land bank and the single window. also lack the technical competency to approach banks for
These two initiatives respond to major constraints associat- financing and to decide on the best financing options. In ad-
ed with land allocation and efficiency of export procedures. dition, there is limited variety, availability and sophistication
The main reason for the delay is the complexity of the insti- of export finance solutions available to companies, with no
tutional landscape mentioned earlier, as well as differences special export credit financing, value chain financing, export
in approaches and policies among institutions. One of the credit refinance window, bilateral export credit lines or export
priorities of Vision 2025 is implementing these solutions, and factoring. Sri Lanka also does not have a development bank
the NES sets the detailed modalities. to assist its enterprises, especially SMEs.18 Finally, the export
finance sector regulatory framework is outdated, especially
Absence of operational guidelines to implement new / up- regarding the repatriation of export proceeds.
dated regulations / legislation ( Merchant Shipping Act,
etc. ). A very common problem is the absence of opera-
tional guidelines to ensure implementation of regulations
which have been gazetted. This adds to the already very
complex legal framework composed of multiple layers of
amendments. In many cases the original regulation dates
back more than 50 years. Simplification of national legis-
lation is a major burden which has been, until now, mostly
avoided because of time constraints. The NES has prioritized 18.– Verité Research ( 2015 ). Expanding Exports : Role and Relevance of
the areas were these reforms are unavoidable. Export Finance.
• Difficult access to / availability of relevant and affordable na- • Lack of access to advanced certification and testing facilities,
tional data and market information to make strategic product and prohibitive cost of obtaining such services from abroad.
and market decisions. • Challenging country and product branding requiring efficient
• NQI has limited services available for exporters to comply IP, geographical indication ( GI ) and trademark systems.
with standards in target markets, including no traceability • Targeted export promotion support focuses on few enter-
system or information on applicable international standards prises and markets due to limited resources.
and regulations.
• Limited coordination with foreign missions for data collection
and product promotion in target markets.
Difficult access to / availability of relevant and affordable accredited. In addition, there is no list of required conform-
national data and market information to make strategic ity assessment processes for different product groups and
product and market decisions. On one side, there is a lack people do not know where to find such information. It takes
of proper information about the industries of Sri Lanka, es- producers a lot of time to obtain this information, which of-
pecially in emerging sectors. Statistics related to value chain ten leads to missed opportunities or obtaining services in-
operations have not been recorded properly, which makes ternationally at a higher cost.
it difficult to establish baselines for any development strat-
egy. On the other side, information is also lacking about Challenging country and product branding requiring effi-
markets. Challenges accessing relevant and competitively cient IP, GI and trademark systems. National branding ini-
priced trade information on key markets have been highlight- tiatives for specific industries and for Sri Lanka as a whole
ed as a major constraint to entering new markets. Access to have not yet been implemented. This type of widespread
quality trade intelligence and in-market support from com- initiative requires industry coordination as well as strong in-
mercial attachés remains challenging for many exporters stitutional capacities. The partial coverage of the legal frame-
and SMEs. work and inadequate recourse system for the protection of
IP ( e.g. GIs ), also discourage private investments in brand-
NQI has limited services available for exporters to com- ing, as brands are exposed to copying in target markets.
ply with standards in target markets, including no trace- The current IP registration regime needs to be reviewed and
ability system or information on applicable international fast-tracked, and some missing IP registration tools – such
standards and regulations. A poor quality assurance sys- as GIs, collective marks and database protection – need to
tem, few mutual recognition agreements, a challenged me- be put in place. Finally, Sri Lanka is not a member of the
trology function and the limited ability of local laboratories Madrid and Lisbon agreements, which require that exported
to issue certain international certificates and handle a large products be protected in each individual market.
number of requests all pose major challenges, not just for
SMEs but also for larger enterprises. The uneven regional Targeted export promotion support focuses on few enter-
distribution of laboratories across Sri Lanka, limited capacity prises and markets due to limited resources. Insufficiently
to enforce food safety and consumer protection measures, focused and coordinated promotion of Sri Lankan brands
and outdated legislation make it complicated for enterprises and enterprise support in trade promotion activities curtails
to ensure the quality of products. This is confirmed by the the development of sustainable demand for Sri Lankan
scores of Sri Lanka in the ITC SME Competitiveness Outlook products. While established industries can build on long-
report carried out in 2016. The scores show that getting an term business networks, SMEs and nascent industries face
international quality certificate is among the top five major challenges accessing market information and requirements
constraints faced by SMEs ( see figure 19 ). ( from standards and regulations to licensing requirements ).
Another side of the issue is the limited skills of SMEs to make
Lack of access to advanced certification and testing fa- the most of their participation in fairs and the capacity to
cilities, and prohibitive cost of obtaining such services conduct successful business-to-business ( B2B ) meetings.
from abroad. As mentioned, the NQI in Sri Lanka is lag-
ging in multiple ways, specifically on conformity assessment. Limited coordination with foreign missions for data col-
Testing and certification of certain parameters is not avail- lection and product promotion in target markets. Foreign
able nationally. While several test laboratories operate in the missions are extensively used by other countries to channel
country, the capacities of these are still limited. SLSI and the information, both from the country for promotion, and to the
Industrial Technology Institute ( ITI ) offer a wide range of test- country for market information. They also play a key role in
ing services and private institutions provide some services lobbying for specific product recognition measures in target
in niche areas, and the medical testing laboratories sector markets. These functions are poorly executed by Sri Lankan
is growing. foreign missions due to limited coordination with the private
sector, limited resources of commercial missions and the
Not all laboratories are accredited against International absence of an online system for coordination. There is po-
Organization for Standardization / International Electrotech tential to diversify markets for Sri Lanka if coordination with
nical Commission 17025 yet, and in many cases laborato- foreign missions is systematized and broadened.
ries are not in a position to demonstrate their competence or
traceability of measurements because staff capacities, facili-
ties and instruments are insufficient or there are no domesti-
cally available measures – such as suitable inter-laboratory
comparisons, proficiency testing schemes, or certified ref-
erence materials – against which to test their competence.
The calibration capacity required to support all existing
testing laboratories is also insufficient. Very few CABs are
• Certain legislation impedes the implementation of the single • Challenging expansion of cargo, entrepot, MCC and LCL
window and other TSF reforms. de-stuffing capacity due to delays in reforming procedures,
• Delayed application of ‘expediting shipments’ due to insuf- legislation and institutional frameworks.
ficient warehousing, including cold storage facilities, and the • Limited development of logistics services ( cold storage,
clearance process ( specifically affecting less than container reefers, dry ports, etc. ) outside of the Western Province,
load ( LCL ) and air cargo ) at ports. with limited loading / unloading points along trade corridors.
Certain legislation impedes the implementation of the upgrade its logistics sector and transform into a regional
single window and other TSF reforms. Various border hub. LCL de-stuffing and handling time is long, which af-
procedures and regulations create significant barriers for fects import-related charges. It can take 3–7 days or more
enterprises. Complex requirements exclude SMEs and entre- to unload a consignment due to inadequacies at ports.
preneurs who do not have high business competency from Problems range from lack of infrastructure and equipment
accessing world markets. Many trade-related processes re- to both shortages of labour and overstaffing, limited auto-
main manual and paper-based, with significant duplication mation and labour allocation, and productivity inefficiencies.
of documentation required by different agencies. SMEs in Pilferage and damage due to organized sabotage is also a
particular are often not aware of existing paperless process- serious problem for inbound consignees that depend on im-
es and use paper-based methods. ported inputs for manufacturing and processing. As a result,
export processing is delayed and clearing costs increase.
Implementation of a single window system has been dis-
cussed for many years but never realized. A single window In addition, there are not enough good MCC facilities, as
system would provide a great opportunity to reduce the evidenced by the lack of modern warehouses at ports that
complexity of cross-border formalities if a number of key can support fast pick and pack operations. According
principles are taken into account. First, the implementation to stakeholders, there is only one warehouse with ade-
of the single window should be premised on the reengineer- quate facilities. This issue partly stems from no land be-
ing of trade procedures, with a view to align documentation ing made available for the private sector to operate closer
and information requirements to international standards ( e.g. to Colombo Port. There is no reclaimed land adjacent the
UN Layout Key, WCO data model ) and to remove redundant Colombo International Container Terminal or at productive
processes and information requirements. Second, the single areas around Colombo Port. The logistics corridor between
window project should include the modernization and au- Colombo Port and the international airport in Katunayake
tomation of border regulatory agencies whose operations has a number of suitable locations that can be developed for
are still manual and paper-based. Finally, the single window this purpose but the land bank proposed by the Government
project should entail a large scale review of government- is to identify logistics services areas and the Ministry of
wide and agency-specific acts, regulations and administra- Megapolis and Western Development has already identi-
tive procedures to ensure that Sri Lanka legal framework is fied the proper land in the Megapolis plan, implementation
consistent with the TFA requirements and conducive to the of which will start from 2018. According to stakeholders, land
establishment of the single window. is available on the northern side of Colombo Port and sev-
eral facilities can be easily relocated there in the short term.
The three principles mentioned above have been taken into
account into the recently launched single window initiative There is no multi-user facility for buying / storage / processing
in Sri Lanka. However, it should be noted that two key road- of fresh produce. There are no adequate bonded logistics
blocks still remain : the lack of coordination between cross- centres and existing facilities are not always well connect-
border stakeholders and the difficulty to align agencies’ legal ed. A feasibility study by Expolanka ( industry operator ) de-
frameworks. termined there is no clear demand for such facilities since
private operators use their own facilities and transport us-
Delayed application of ‘expediting shipments’ due to in- ing dry ice. However, no clear market demand to develop
sufficient warehousing, including cold storage facilities, such facilities is explained by limited information and sta-
and the clearance process ( specifically affecting LCL and tistics to support the development of a cold chain industry
air cargo ) at ports. A number of inefficiencies limit logistics and the absence of a detailed study on the need to establish
operations, the upshot of which is that the country cannot such facilities.
Finally, there are no ‘plug and play’ solutions available for environment with maximum automation through a na-
new players to easily establish their operations. Global play- tional single window.
ers need to be attracted to start operations and distribution No paperless transaction and no interconnected Customs
immediately. Therefore, identified locations should be allo- service station for document submission ( when entering
cated quickly, with operational infrastructure such as rail and a port ) included in the Customs Ordinance to facilitate
road connectivity so cargo clearance and movements can logistics operations ( Customs Ordinance of 1869 ).
be performed fast and at low cost. Such plans should be
amalgamated with the Megapolis project and other regional Limited improvements have been made through the
development plans. Automated System for Customs Data ( ASYCUDA ) but the
overall process has not been well-linked to facilitate trade.
Challenging expansion of cargo, entrepot, MCC and LCL
de-stuffing capacity due to delays in reforming proce- Limited development of logistics services ( cold storage,
dures, legislation and institutional frameworks. Outdated reefers, dry ports, etc. ) outside of the Western Province,
laws on logistics activities impede upscaling operations. The with limited loading / unloading points along trade corri-
following laws pose problems : dors. In addition to lacking infrastructure and regulations,
logistics-related services are underdeveloped in Sri Lanka.
Lack of competitive tariffs and laws encouraging MCC : There are no reliable temperature-controlled facilities and
a policy for liberalizing MCC/LCL was presented in the appropriate value adding services along logistics corridors.
last budget but the issuing of the relevant Gazette and The limited capacities of airports and port terminals limits
guidelines amendments has been delayed. volume growth of the industry. The rail networks are un-
A new Customs Act has been drafted but not submitted used / underused for transportation of containers and reefer
to the Cabinet – the existing Customs Ordinance is out- containers, and integrated multimodal connectivity networks
dated. The proposed new Act, which has been drafted are missing. There is also low capacity utilization of vehicles
to facilitate trade in line with World Trade Organization and reefer trucks to transport frozen food. A strategic plan
Trade Facilitation Agreement commitments, needs to be has to be put in place for perishable cargo management that
adopted as a priority. The overall result would be reduced can help exports and domestic consumption costs.
transaction costs, increased speed and a paperless
• High concentration of export industries and services in • An appropriate support framework has not been established
Western Province, with underdeveloped SME / export services to encourage firms to innovate.
networks in other regions. • Insufficient promotion and investment targeting for emerging
• Limited use of modern technologies due to high costs, industries.
limited awareness of new trends and insufficient skills.
High concentration of export industries and services in institutional support and digital networks, and by improving
Western Province, with underdeveloped SMEs / export ser- logistics’ connections.
vices networks in other regions. National development has
until now tended to occur in the Western Province and in ur- Limited use of modern technologies due to high costs,
ban centres, leaving other provinces out, especially in the limited awareness of new trends and insufficient skills.
north. Today, 82 % of Sri Lanka’s population still resides in ru- Although lead firms have emerged in many industries, pre-
ral regions, where the agricultural sector employs most work- senting themselves as examples and using modern technol-
ers.19 SMEs from these less-developed regions face greater ogies to be competitive, smaller firms still struggle to catch
difficulty exporting and have few incentives to do so. This up with global trends. This is especially the case for SMEs in
is also due to the fact that regional export support services the regions. Understanding of the need to upgrade existing
are scarce and tend to be concentrated around Colombo. production lines, as well as the appropriate financial tools
The NES will look into ways to connect these regions through to do so, are limited. Finding appropriate skills locally is a
challenge for firms that need workers able to operate more
advanced technologies in production plants.
19.– World Bank Group ( 2017 ). The World Bank in Sri Lanka – overview.
Available from www.worldbank.org/en/country/srilanka/overview.
Insufficient promotion and investment targeting for emerg- Photo: (cc) - Anushka Wijesinha
ing industries. Investment targeting has been carried out
predominantly in traditional sectors such as apparel, con-
struction and tourism services. Investment can be a tool to specific investment areas, which are listed in each sector
foster economic diversification but has not yet been used strategy. The sector strategies also define the coordination
as such. Emerging sectors under the NES require some mechanisms required to confirm areas of focus along each
sector value chain. Increased investment targeting through
20.– The I&E Strategy provides more details on these issues. key institutions is needed to drive export development.
The analysis of trade patterns, a detailed literature review and the requirements and education ; complex and unpredictable policy
challenges highlighted by public–private stakeholders during the frameworks ; and the need to ensure SMEs are included among the
first NES consultation have brought to light several trade facts. Over country’s exporters. Reforms to the financial, trade and business
the last five years, Sri Lanka has successfully diversified into new environment have been identified as critical to create a new cycle
markets but mainly through traditional products. The findings sug- of growth for the Sri Lankan economy.
gest a number of vulnerabilities in Sri Lanka’s export competitive-
The new wave of reforms aims for Sri Lanka to fully participate in
ness that need addressing.
the global economy through offering knowledge-based competitive
Sri Lanka needs to overcome low levels of R&D and innovation, products and services. The intended and anticipated trade-led growth
high tariffs on imported inputs for production and re-export, and the will enhance export competitiveness and strengthen Sri Lanka not
slow improvement of internal logistics and transportation. There are only in the economic, but also in the social, political, education
further challenges in the country’s limited attraction of investment and health spheres.
to emerging export sectors ; the partial disconnect between skills
The time to transform the export sector is now! The current to drive the reforms required for Sri Lanka to reach its poten-
wave of economic reforms aimed at creating a more trans- tial. It defines a detailed road map for faster export growth
parent and flexible business environment, combined with and acknowledges that things need to be done differently if
increasing regional trade opportunities and major transfor- trade’s contribution to economic development is to increase.
mations in production techniques, provide a unique window
of opportunity for Sri Lanka to modernize and trigger a new The NES addresses some of the root causes which con-
cycle of export growth. The NES will enable the country to strain Sri Lankan exports, while simultaneously encour-
realize its full potential as a regional trade hub and a beacon aging market diversification and development. The broad
of trade openness. scope of the NES ensures that it simultaneously addresses
innovation challenges ; attraction of FDI to productive indus-
The NES is a timely catalyst through which the export sec- tries ; removing unnecessary and challenging regulations ;
tor will be reshaped, as it builds consensus among the en- improving online access to key government services and
tire export community about the upcoming tasks and the trade intelligence ; reducing anti-trade tariffs ; strengthening
heaviest roadblocks to be dislodged. To seize the window quality export compliance across the priority value chains ;
of opportunity, Sri Lanka’s NES proposes a clear-cut strate- and reducing the costs of logistics and doing business.
gic orientation for the public and private sectors to join forces
The NES design process provided a rationale for selecting focus The stand-alone sector and TSF strategies focus on their industry-
sectors and TSFs based on their ability to achieve the vision. The specific priorities but also highlight cross-sector priorities such as
NES diagnostics highlighted key national priorities for improved access to technology, development of industry clusters and linking
competitiveness, such as streamlined institutional and regulatory industry to academia. These cross-sector priorities are integrated
frameworks, export finance and improved trade promotion. The main in the main NES.
NES aggregates and consolidates national priorities as well as key
high-level priorities from each sector / TSF into a coherent framework.
“
Through an inclusive and consultative process, Sri Lanka’s
Sri Lanka – an export hub driven
”
industry leaders and public sector representatives defined
the following NES vision : by innovation and investment
Photo: ITC
In order to fulfil this vision, the following strategic objectives of regulations, including the Quarantine Law and Customs
have been identified as the main pillars to structure the ac- Ordinance, as well as reviewing import regulations to
tion planning for an implementable NES. These four broad streamline trade procedures and become an effective trade
objectives, which provide a framework for export develop- hub. The gazetting of the Electronic Transactions Act or the
ment over the next five-year time frame, were considered amendment of the BOI Law will boost the attractiveness of
fundamental for a focused and prioritized NES: the country as an efficient place to do business. The NES
regulatory reform priorities reflect the cross-sectoral needs
of the focus sectors and TSFs. This objective also highlights
1. TO HAVE A BUSINESS-ENABLING, the need for improved export finance and insurance solu-
PREDICTABLE AND TRANSPARENT POLICY tions, and recommends increased involvement of the private
AND REGULATORY FRAMEWORK sector in trade negotiations.
THAT SUPPORTS EXPORTS.
Predictability of regulations and procedures is a priority 2. TO STRENGTHEN SRI LANKAN
for enterprises and exporters to manage operations effi- EXPORTERS’ MARKET-ENTRY
ciently and reduce the costs of doing business. A stream- AND COMPLIANCE CAPACITIES.
lined and transparent regulatory framework is important for
innovators and investors to be able to set up operations in This strategic objective focuses on strengthening two key
Sri Lanka with ease. The private sector considers this ob- TSFs that deliver trade information and promotional sup-
jective fundamental to improve export competitiveness. It port as well as quality compliance services, both of which
focuses on re-engineering processes for improved institu- are necessary to increase exporters’ performance in des-
tional coordination, streamlining administrative procedures tination markets. The improvement of the trade information
and deepening the digitization of trade-related processes. and promotion TSF and the strengthening of the NQI21 will
benefit SMEs, emerging exporters and mature export in-
A transparent and simplified business environment is diffi- dustries alike.
cult to achieve within a fragmented institutional setting and
without re-engineering of business processes within institu- Improved access to market-specific information and analy-
tions. To achieve this objective, the main NES PoA favours ses at a reasonable cost are critical for Sri Lankan export-
initial establishment of an institutional public and private co- ers to understand market opportunities and comply with the
ordination mechanism for trade policy design, formulation regulatory procedures of destination markets. The trade in-
and execution. This key action aims to increase transparen- formation and promotion priorities of the NES strive to im-
cy and coordination between key partners to avoid ad hoc prove data collection, analysis and dissemination processes
policymaking and duplication of efforts. The NES also seeks between key institutions such as EDB, DoC, CBSL, private
improved processes to streamline institutional coordination
and implementation of export development interventions. 21.– A stand-alone NQI Strategy was developed on the basis of the
National Quality Policy – approved by the Cabinet in November 2016,
This objective equally prioritizes updates to Sri Lanka’s reg- the Sri Lanka NQI Gap Assessment was completed by the World Bank
with technical guidance from UNIDO. The NQI Strategy was designed
ulatory environment by amending and reviewing a number with technical assistance from and using the methodology of ITC.
sector chambers of commerce and others, in order to cre- This objective will be achieved through a dual approach of
ate a unique platform for exporters to easily access relevant, increasing transhipment, MCC and commercial hub activ-
up-to-date and affordable market intelligence. This objec- ities for international shipments, while simultaneously en-
tive equally aims to focus trade promotion efforts in line with suring improved services for Sri Lanka’s own transport and
industries’ priorities by increasing engagement with trade exports of goods. A key focus of the Strategy is on reforming
missions, creating a genuine Sri Lankan brand, and ensur- the logistics ecosystem by adjusting key regulations such as
ing exporters’ brand protection by strengthening targeted the Sri Lanka Port Authority Act, Electronic Transactions Act
IP processes. and Commercial Hub Regulations in order to increase the
sophistication and quality of services. The NES also recom-
Quality services in Sri Lanka are relatively developed com- mends provision of adequate facilities – such as warehous-
pared with other lower middle-income countries. Remaining es, bonded logistics centres, common user facilities and
compliance challenges need to be addressed to in- improved rail connections between ports and airports – in
crease enterprises’ ability to satisfy market requirements. order to increase storage capacities, facilitate e-commerce
Strengthening the NQI function will increase the ability of operations, attract more transhipment and increase overall
national institutions to effectively support SMEs’ and export- capacity.
ers’ compliance with market requirements and standards.
The NQI Strategy provides an actionable road map to im- The achievement of this objective depends and builds on
plement the National Quality Policy and improve coordina- Sri Lanka’s World Trade Organization trade facilitation ob-
tion between SLSI, MUSSD, SLAB, the Consumer Affairs ligations implemented by the National Trade Facilitation
Authority, CABs and other institutions responsible for en- Committee and supported by various development part-
suring the quality of products. This objective will also make ners. Recognition of Sri Lanka as a logistics hub depends
testing, adherence to standards and traceability more af- partly on implementing the single window system, rolling out
fordable and accessible, thereby increasing the protection e-payment solutions and increasing the efficiency of border
of Sri Lankan consumers as well as market entry for export- agencies. Improved logistics and trade services will be key
ers. Finally, with the coming free trade agreements to be to increasing Sri Lanka’s own exports of goods.
negotiated by Sri Lanka,22 quality systems, standards and
mutual recognition agreements need to keep pace. The NES
privileges quality management and trade information and 4. TO DRIVE EXPORT DIVERSIFICATION
promotion not only to improve the sustainability of suppli- THROUGH INNOVATION AND BY
er-client relations in third markets but also to improve value STRENGTHENING EMERGING EXPORT
addition of exports.
SECTORS.
This strategic objective will create the conditions to im-
3. TO BECOME AN EFFICIENT TRADE AND plement targeted solutions to develop visionary and
LOGISTICS HUB TO FACILITATE EXPORTS. emerging export sectors. Established export sectors such
as apparel, tea, rubber and coconut products have proven
This objective is critical for Sri Lanka to become a rec- their ability to compete in world markets.23 While these ma-
ognized hub serving Asia and the world. It aims to create ture sectors are the backbone of Sri Lanka’s export perfor-
the conditions for Sri Lanka to leverage its enormous ship- mance, enablement and strengthening of new industries is
ping and logistics potential by strengthening its infrastruc- a priority to empower faster export growth. Most studies of
ture, improving services and attracting the investment and Sri Lanka’s export sector confirm the importance of diver-
skills required for sustainable growth. Handling 5.7 million sifying the export portfolio. The achievement of this ambi-
twenty-foot equivalent container units in 2016, Colombo Port tious objective requires a multidimensional approach to the
is the twenty-third largest port in the world. With other ma- development of productive capacities.
jor commercial ports being expanded and developed, such
as Hambantota for bulk and roll-on / roll-off cargo, Sri Lanka In order to capitalize on the potential of emerging export
has enormous potential to attract additional shipping lines sectors, the NES focuses on implementing necessary na-
to strengthen its status as an internationally renowned mari- tional solutions, while equally targeting industry-specific
time hub. interventions. This dual approach to sector development en-
sures that all priority actions – including regulations, industry
23.– These sectors are driven by strong private sector ownership and
built on the sectors’ competitive advantages. The rubber sector has the
22.– EDB ( 2016 ). The forthcoming Free Trade Agreement ( FTA ) between Sri Lanka Rubber Industry Master Plan 2017–2026 and the textiles sector is
Sri Lanka & China, 14 December. Available from www.srilankabusiness. developing its own new sector strategy. Other important sectors with high
com/blog/the-forthcoming-free-trade-agreement-between-sri-lanka-and- export potential, such as fisheries, are already receiving support to develop
china.html. strategically.
coordination and market development – are properly ad- Innovation is critical to diversify Sri Lankan exports. As inno-
dressed to drive growth in each focus sector. The NES fo- vation creates effects beyond a specific export sector, an in-
cuses on reinforcing new export industries by proactively dependent working group of public and private stakeholders
improving the provision of skills to support the growth of was appointed by the Prime Minister to design a stand-alone
these industries ; attracting investment, technologies and I&E Strategy.24 The implementation of this I&E Strategy will
knowledge into these promising sectors ; and supporting support the NES priority to reorient R&D and innovation to
integration of SMEs from across Sri Lanka into the export support the needs of emerging export sectors.
value chain. For each focus sector, specific measures aim
to improve competitiveness through practical solutions such
as facilitated access to competitively priced inputs, improved 24.– The I&E Strategy of Sri Lanka was developed independently of the
NES, by MoDSIT with the technical assistance of the World Bank. The
production techniques or enabled industry clusters in dedi- NES and I&E Strategy jointly contribute to build innovation in exports and
cated BOI zones or special economic zones. entrepreneurship of SMEs.
To To To
have a business strengthen drive export
To become an
enabling, predictable Sri Lankan diversification
efficient trade and
and transparent policy exporters’ through
logistics hub
and regulatory market-entry innovation and
to facilitate exports
framework that supports and compliance by strengthening
exports capacities emerging sectors
PRIORITIZED TRADE SUPPORT warehousing facilities, and simplified and predictable trade
FUNCTIONS facilitation measures. These TSFs target key horizontal di-
mensions of trade that affect the overall competitiveness of
Building on the vision and the strategic objectives described Sri Lanka’s export sector.
above, the Sri Lanka NES includes TSF strategies that tar-
get horizontal dimensions of trade affecting the overall com- As part of Sri Lanka’s NES, the following TSFs were pri-
petitiveness and efficient functioning of the entire export oritized for focused intervention : trade information and
sector. Examples of such TSFs include testing products in promotion, NQI, logistics and innovation and entrepre-
laboratories ( quality ), market analysis and trade promotion neurship. The priority TSFs are presented and discussed
activities, access to credit guarantee schemes, access to in greater detail in the following section.
NQI
Rationale The NQI in Sri Lanka requires a strategic approach to increase its effectiveness and efficiency, as it is a key
export support service and is lagging. However, considering Sri Lanka’s need to address quality challenges
beyond the sole needs of exporters and to allow implementation of the recently developed National Quality
Policy, the NQI Strategy was spun off from the NES and carried forward as an individual initiative with a
cross-cutting perspective. The NES and the NQI Strategy were both initiated to improve the competitiveness
of Sri Lanka’s trade, and are thus interdependent to successfully boost the ability of exporters to comply with
market requirements.
How the • Build awareness and understanding about quality in the private sector and general public.
Strategy • Streamline food safety control in Sri Lanka.
will support • Develop national standards in line with newly developing economic sectors.
exporters • Reinforce the overall institutional coordination in the NQI.
• Align the NQI with international best practice.
• Strengthen technical capacities of NQI core institutions.
• Promote the participation of national technical institutions ( SLSI, SLAB, MUSSD ) in international technical
forums.
• Initiate the development of an umbrella legal framework for the NQI.
• Broaden the metrology function.
• Strengthen and broaden conformity assessment in Sri Lanka.
Strategic • Implement the National Quality Policy and improve the institutional framework of the NQI.
orientations • Achieve international recognition to the NQI system of Sri Lanka.
• Strengthen the NQI framework to support general socioeconomic development.
Logistics
Rationale Strategically located in South-East Asia, at the crossroads of the fastest-growing region in the world,
Sri Lanka is close to many emerging markets and is already an important regional logistics hub. The
overall performance of port-related services has been improving. Total container handling in 2016
increased by 10.6 % to 5.7 million twenty-foot equivalent container units, up from 5.2 million handled in
2015.
While Sri Lanka is one of the major transhipment hubs in Asia, the logistics industry has not fully tapped
the growing opportunities in transhipment and e-commerce. There is a unique opportunity to develop
a world-class logistics hub and enter the global supply chain industry that is rapidly digitizing and
evolving with a new generation of consumers.
Sri Lanka aims to transform into South Asia’s leading maritime, logistics and distribution hub to
support the national economy. This will be achieved by fostering the right regulatory environment
and implementing enabling procedures and guidelines for provision of efficient logistics services.
These actions will create the conditions for the private sector to lead development of the logistics
sector, attract the investment needed to install the proper facilities across the country ( cold storage
solutions and multi-user facilities ) and provide value added services through MCC, LCL de-stuffing and
commercial hub activities.
How the • Streamline regulatory and institutional reforms to improve Sri Lanka’s attractiveness as a logistics
Strategy hub servicing Asia.
will support • Increased capacities of ports and airports to provide value added services through MCC, LCL de-
exporters stuffing, e-commerce and commercial hub activities.
• Targeted sector and investment promotion in overseas destination markets.
Strategic • Create an enabling and efficient business environment driven by technology and public–private
orientations coordination.
• Ensure adequate facilities and the availability of a qualified labour force.
• Promote the global image of Sri Lanka as a logistics hub.
25.– The I&E strategy was developed in parallel with the NES process, by MoDSIT, MSTRD and MIC, with technical assistance from the World Bank.
This I&E strategy is complemented by “Innovating Sri Lanka’ developed by the Ministry of Science Technology and Research with COSTI
Photo: mpfb
IT–BPM
Rationale In the past 10 years, the Sri Lankan IT–BPM industry has expanded by 300 % to reach US $ 1.2
billion in export revenue. The sector provides employment to more than 80,000 professionals and
contributes 12 % of Sri Lankan services exports. Compared with other export sectors, the IT–BPM
sector has shown great potential to increase export revenue. Sri Lankan IT–BPM companies have
demonstrated their competitiveness internationally. This competitiveness rests on reasonable costs,
high-quality services and an educated workforce with exceptional skills.
This Strategy identifies two specific areas as priorities for implementation. First, create a business-
enabling environment and address policy and regulatory bottlenecks swiftly, providing the
necessary institutional support to improve marketing and promotion of the sector. Second, launch a
‘champion builder’ programme to target firms with exponential growth potential that collectively can
help boost sector export revenue by US $ 2 billion.
Main market • Reaching new markets with traditional IT products and developing new products : mixed reality,
opportunities augmented reality and Internet of Things solutions where software and hardware come together.
• Increasing the offer of knowledge process outsourcing services ( financial and accounting opera-
tions, data and document conversion ).
• Enlarging market outreach to provide BPM services and technical support to large multinational
corporations.
What the Strategy • Produce pipeline SMEs and create bigger champions.
will change • Move up IP valuation and high technology product engineering
Strategic • To support investment and exports in the IT–BPM sector through a business-enabling, predictable
orientations and transparent policy and regulatory framework.
• To drive export growth through I&E.
• To improve the supply of skilled, highly qualified professionals to satisfy IT–BPM market growth.
• To grow champion firms ( ‘the $2 billion plan’ ).
Wellness tourism
Rationale ‘Wellness’ is a buzzword in the tourism sector and beyond. Being a global phenomenon, ‘wellness’
can come in many different forms. International travellers with wellness ( or health ) in mind look for
services that are based on local traditions and natural assets. There is growing demand for hotels
with a health orientation, as well as for facilities with a well-defined specialization or concept.
Sri Lanka has strategic advantages for the development of its wellness tourism sector. There is a
clear synergy between global trends and Sri Lanka’s traditional health approaches. The country has
natural and traditional endowments that can be used to foster a sustainable wellness tourism value
chain that is deeply rooted in local communities and traditions.
Main market • Anchor market development on a strong quality assurance mechanism for existing German and
opportunities Japanese markets, and to be able to diversify into new ones.
• Moved to new untapped markets, such as the United Kingdom, Sweden, the Russian Federation
and Eastern Europe, and Gulf states and business cities in the Far East.
• Diversify wellness from the Ayurvedic offer into new geographic areas ( small-scale developments
such as Shinrin-yoku, herbal gardens or others ).
What the Strategy • Develop a framework for this nascent sector, both institutional and regulatory, to ensure controlled
will change expansion and avoid negative impacts ( quality, environment, reputation, etc. ).
• Support gazetting of the Ayurveda Act and complement it with additional regulations for other
wellness services to establish a strong quality assurance system.
• Foster R&D efforts, develop IP protection and support branding and promotion of the industry.
Strategic • Develop coordination between traditional and Western health tourism.
orientations • Set up a quality assurance system for wellness and traditional health systems.
• Build information about the Sri Lankan health tourism sector and about its target markets.
Boating industry
Rationale Sri Lanka intends to expand its boating industry – now focused almost solely on commercial
vessels – and make the country a renowned recreational boating hub and yacht service centre for
the Indian Ocean. A boating industry includes not only the boatbuilding sector but also after-sales
services ( including refitting and repair ), marina services, associated recreational services such as
boat charters and all services connected with the efficient use of any vessel.
Sri Lanka’s strategic geographical location at the crossroads of the main maritime routes in South
Asia, combined with the Sri Lankan boat industry’s long experience, can make the country an
attractive maritime hub that provides a full range of services for a boat’s entire life cycle, including
assembly, refuelling, refit and repair for numerous types of boats, including both seagoing and
inland watercraft.
Main market • A full range of services for the full boat life cycle : assembling, refuelling, refit and repair services
opportunities for various types of boats.
• Expanding production of recreational boats for export to the EU market and emerging regional
markets ( Maldives, Singapore, Viet Nam, Kenya ).
• Production of new boat models for the fishing and boating industry.
• Boating tourism : sailing, marina services, chartering and boat rental.
What the Strategy • Enable an increase in production through creation of industry clusters.
will change • Improved industry performance through partnerships and targeted innovation.
• Generate manufacturing employment while also diversifying the tourism offer of Sri Lanka.
Strategic • To create an enabling environment for industry development by updating regulations and infra-
orientations structure.
• To raise the industry’s performance through partnerships and targeted innovation.
• To enhance national and international visibility of Sri Lanka’s boating industry.
MOVING TO ACTION
•Establish institutional public •Strengthen the quality •Provide adequate facilities and •Attract investment into
and private coordination for infrastructure to support the systems to increase the number promising new sectors to spur
effective trade policy, design, compliance capacity of and quality of logistics economic diversification
formulation and execution exporting companies operations •Proactively improve national
•Restructure and streamline Sri •Ensure a constant flow of the •Diversify logistics services and skills development for
Lanka’s regulatory framework to latest trade information so expand logistics operations emerging sectors
ensure transparency and exporting companies can adjust •Increase shipping capacities to •Reorient R&D and innovation
minimize overlapping mandates their offering take advantage of regional trade initiatives to support the needs
to meet the modern demands of •Create a genuine national flows of NES sectors
exporting image for customers abroad, •Support SME integration in the
•Channel exporters’ concerns built on branding and economy, including in the
into trade negotiations promotion regions, and support the
•Expand the export finance •Strengthen IP protection for Sri establishment of start -ups
sector to provide everything Lankan exports
required for a trade hub
The development of the main NES PoA intervened at the fi- national-level issues. The combination of both allows a com-
nal stage of the strategy design process. This PoA builds on prehensive main PoA to be built which creates coherence
the significant amount of information collected during the among all sector and TSF PoAs under the NES. The logic
NES design and organizes it in a structured and prioritized followed is shown in Figure 21.
manner. The content of the main PoA is essentially drawn
from two different sources : the cross-cutting issues that
arose from the sector or TSF strategies and well-identified
[ Moving to action ]
36
Figure 21 : Logic for the definition of the main NES PoA
The purpose of the national PoA is to ensure coherence is develop a national PoA, since they tend to be very specific
created between the sector and TSF PoAs, in order to avoid and lose sight of broad national objectives. This is why the
dispersion of efforts and overlap of interventions, and to fa- national PoA integrates activities that are national in nature
cilitate intervention monitoring under the NES. At the same and complement the cross-cutting sector issues. This brings
time, sector and function PoAs cannot be the only source to all the NES under a coherent implementation framework.
Cabinet
MoDSIT
NES Management Unit EDB facilitation of
(housed at MODSIT) Advisory Committees
Logistics
Trade Information
Export advisory committees were revamped and reorgan- Export advisory committees are composed of private and
ized to give them more influence and capacity to steer public sector representatives mandated to steer the devel-
their export industry development strategically. This pub- opment of specific export industries in a strategic manner.
lic–private coordination mechanism works within the existing The committees are operational and responsible for guiding
legal framework of Sri Lanka. The Export Development Act the implementation of their respective sector and TSF strat-
( 1979 ) grants the EDB the following power : ‘On advice from egies. With EDB support, the committees are responsible
the Board, the Minister may by Order in the Gazette, estab- for providing strategic direction to a specific export indus-
lish advisory committees for the development and promo- try, and have advisory roles in the implementation of trade
tion of certain products, product groups and commodities development interventions.
as well as functional aspects of trade’.
[ Moving to action ]
38
A key recommendation provided by the vast majority of the 556 influences trade performance and promotes expansion of
participants of the NES design process was to ( re )establish a high- exports.
level formal public–private mechanism responsible for coordinating • In Singapore, the Committee on Singapore’s Competitiveness
all trade development interventions, including the NES, and reduce ( CSC ) was established May 1997 through a directive from
duplications among trade-related institutions ( see main NES PoA – the President of Singapore to the Ministry of Trade and
1.1.1 ). The membership is to be appointed in a transparent manner. Industry. The CSC is composed of 15 members representing
The council is to be chaired by the President or Prime Minister. The government ministry leaders, private sector leaders, banking
council should reduce ad hoc trade policymaking and oversee the institution representatives and trade union representatives.
implementation of trade-related initiatives.
• In March 2015, Malaysia’s Ministry of International Trade
A high-level trade steering body is best practice. and Industry established a National Export Council chaired
by the Prime Minister. The Council aims to boost exports
• In the United States, the President’s Export Council per-
through better facilitation, including improving processes,
forms the overarching advisory function in the domain of
procedures, regulations and documentation for exports ;
international trade. This council advises the President on
infrastructure ; certification requirements ; and logistics.
crucial Government policies and programmes, which in turn
A NES MANAGEMENT UNIT TO MAINTAIN agencies, industry associations, private sector organizations
THE MOMENTUM OF IMPLEMENTATION and development partners to ensure coordination in the im-
plementation of the NES. Additionally, the NES Management
A NES Management Unit is operational at MoDSIT to co- Unit will track the progress of implementation and prepare
ordinate and monitor implementation of Sri Lanka’s NES. progress reports to be shared with export advisory commit-
The Management Unit reports to the Secretary of MoDSIT tees, MoDSIT and the highest level of Government. Finally,
and is primarily responsible for ensuring the PoAs adopted it will work in close collaboration with key implementers to
under the NES are implemented in a timely and efficient guide the development and submission of annual national
manner. The NES Management Unit is composed of full-time budget proposals relevant for NES implementation.
staff seconded from key trade-related national institutions of
Sri Lanka. It will work in close coordination with the private Implementation responsibility rests with the leading nation-
sector and the Ministry of National Policies and Economic al institutions identified in the NES PoAs. Public and private
Affairs ( MoNPEA ) and the Ministry of Finance ( MoF ) to pro- representatives have identified in the NES PoAs one respon-
gramme and monitor NES implementation. sible public or private institution responsible for implementing
priority activities. Public institutions have been consulted to
In collaboration with the advisory committees, the NES integrate NES priorities into their annual planning cycle and
Management Unit will support and guide implementing national budget proposals. Planning units of the Government
partners in the programming and delivery of priority pro- will refer to the NES PoAs for guidance in programming.
jects. The NES Management Unit is responsible for ensur- Private sector institutions will implement their own NES pri-
ing the NES PoAs are implemented in a timely and efficient orities, as the private sector is the greatest beneficiary of
manner by working closely with relevant ministries, national NES implementation.
Figure 23 : NES annual programmatic cycle across key implementing partners
Tracking and
monitoring contribu-
tion to strategy
implementation
Resource,
identification,
allocation and
mobilisation
The NES provides a clear road map for the entire export
community concerning the interventions required to trans-
form the Sri Lankan export sector. With NES implemen-
tation supporting the objectives of Vision 2025 and the
NTP, the country can now realize its full potential as a re-
gional trade hub. Photo: mpfb
[ Moving to action ]
40
To achieve the vision and strategic objectives discussed, a robust, • Start / end dates : The desired time frame of the activity.
actionable and realistic strategic PoA is required. This is provided • Targets : Quantifiable targets that allow completion monitor-
in the section below and constitutes the planning instrument of ing of the activity during the implementation stage.
the NES.
• Leading implementer : One single accountable lead institu-
The PoA is structured along the four strategic objectives and the tion per activity. ( The institution may also have a technical
operational objectives described above. For each objective, the PoA role or may have only an oversight and coordination role. )
outlines detailed activities and their implementation modalities, • Supporting implementing partners : Any institution that
which include : should be involved at any stage of the activity’s implementation.
• Priority level : Priority 1 being the highest and priority 3 • Indicative costs (US $) : An estimate of the activity’s cost
the lowest. for the total implementation period.
STRATEGIC OBJECTIVE 1 : TO HAVE A BUSINESS-ENABLING, PREDICTABLE AND TRANSPARENT POLICY AND
REGULATORY FRAMEWORK THAT SUPPORTS EXPORTS
Strategic Operational Activity Priority Start date End date Targets Leading Supporting Indicative Link with sector
objectives objectives implementing implementing costs and TSFs
partner partners ( USD ) strategies
1. To have 1.1 : Establish 1.1.1 Establish a high-level formal public–private 1 01/04/2018 31/12/2018 High-level public–private Ministry of Ministry of National 25,000
business- institutional, mechanism that will be responsible for coordinat- mechanism established and Development Policies and Economic
enabling, public and private ing all trade development interventions, includ- operational. Strategies and Affairs ; Ministry of
predictable and coordination for ing the NES, among all responsible ministries and International Finance ; Export De-
transparent effective trade institutions. The membership will be appointed in a Trade velopment Board ;
policy and policy, design, transparent manner. The council will be chaired by Exporters Association
regulatory formulation and the President or Prime Minister. It will reduce ad hoc of Sri Lanka ; Ceylon
framework execution trade policy meetings and oversee the implementa- Chamber of Commerce
that supports tion of trade-related initiatives. The mechanism will ( CCC ) ; National Cham-
exports. pay particular attention to : ber of Exporters of
• Ensuring transparency in information Sri Lanka ( NCE ) ; Fed-
dissemination and in decision-making and eration of Chambers of
composition. Commerce in Sri Lanka
• Conducting regular meetings and ensuring ( FCCISL )
accountability.
• Defining clear terms of reference and internal
rules and regulations.
• Evaluating the council’s and members’
performance.
• Dual party representation.
1.1.2 Elaborate a clear guide for trade policy formu- 2 01/04/2019 31/12/2022 • Guide for trade policy Ministry of Department of Com- 5,000
lation and execution at national and sectoral level to formulation developed Development merce
ensure effective public and private consultation. • Training to policy makers Strategies and
provided International
Trade
1.1.3 Establish EDB advisory committees for NES 1 01/04/2018 31/12/2020 • Advisory committees Export Develop- Ministry of Develop- 50,000 Boat building:
focus sectors and TSFs, as well as other priority established and operational. ment Board ment Strategies and 2.4.1 ; IT-BPM:
export sectors. Enable committees with operational • Quarterly meeting of advisory International Trade ; 1.1.1 ; Logistics:
support, ensure transparency in appointment of committees held and minutes Exporters Association 1.2.1 ; Electrical
Strategic Operational Activity Priority Start date End date Targets Leading Supporting Indicative Link with sector
objectives objectives implementing implementing costs and TSFs
partner partners ( USD ) strategies
1. To have 1.2 : Restructure 1.2.3 Ensure streamlining of gazetting of the follow- 1 01/06/2018 31/12/2022 • Guidelines for the Electronic • Ministry of Ministry of Telecom- 20,000 Wellness tourism:
business- and streamline ing regulations and operational guidelines : Transactions Act in place Development munication and Digital 2.3.2 ; Logistics:
enabling, Sri Lanka’s • Electronic Transactions Act, including e-payment, • Ayurveda Act gazetted Strategies and Infrastructure ; Ministry 1.1.12
predictable and regulatory e signature, e-documents and tracking ( NES ) • Trade Remedy Law gazetted International of Ports and Shipping ;
transparent framework • Ayurveda Act ( Wellness tourism ) and operational guidelines Trade NES Information and Com-
policy and to ensure • Trade Remedy Law published Management munication Technology
regulatory transparency Unit Agency ( ICTA ) ; Depart-
framework and minimize ment of Commerce
that supports overlapping ; Ministry of Health,
exports. mandates to Nutrition & Indigenous
meet the modern Medicine
demands of 1.2.4 Ensure development of the following new 2 01/04/2019 31/12/2022 • Recreational crafts regulatory • Ministry of Ministry of Ports and 50,000 Boat building:
exporting regulations : framework for navigation Development Shipping ; Ministry of 1.1.1 ; National
• Develop new maritime anti-trust laws in line with • Maritime anti-trust laws Strategies and Science,Technology quality infrastruc-
international best practices to establish Sri Lanka developed and gazetted International and Research ture: 1.2.3 ; Logis-
as a maritime nation. • NQI law developed and Trade NES tics: 1.1.11
• Draft an umbrella law defining the whole NQI and gazetted Management
institutions’ interactions, including conformity Unit
assessment.
1.2.5 Amend the Sri Lankan visa regime along the 2 01/04/2019 31/12/2021 • Fast-track visa and other Department of Ministry of National 20,000 IT-BPM: 2.3.1,
following lines : residency requirements for Immigration and Policies and Economic 3.3.2 ; Wellness
• Include fast-tracking of visa and other residency diaspora available. ( IT-BPM ) Emigration Affairs ; Ministry of In- tourism: 3.4.1
requirements for diaspora. ( IT-BPM ) • Short-term business visas for dustry and Commerce ;
• Facilitate short-term business visas for disaster disaster recovery/business Ministry of Develop-
recovery/business continuity services ( IT-BPM ) continuity services facilitated ment Strategies and
• Amend the immigration regulation by introducing ( IT-BPM ) International Trade ;
new visit purposes categories : wellness, • Immigration regulation for Exporters Association
Ayurvedic treatment, medical and hospitalization, wellness, Ayurvedic treatment, of Sri Lanka ; Ceylon
transit. ( Wellness tourism ) medical and hospitalization, Chamber of Commerce
etc. available ( wellness ( CCC ) ; National Cham-
tourism ) ber of Exporters of
Sri Lanka ( NCE ) ; Fed-
Strategic Operational Activity Priority Start date End date Targets Leading Supporting Indicative Link with sector
objectives objectives implementing implementing costs and TSFs
partner partners ( USD ) strategies
1. To have 1.3 : Channel 1.3.2 Provide regular capacity-building and develop 2 01/04/2018 31/12/2022 • Annual training for trade Department of Ministry of Develop- 30,000
business- exporters’ guidelines for trade negotiators about multilateral negotiators completed Commerce ment Strategies and
enabling, concerns trading systems and a trade negotiations framework. • Standardized methodology on International Trade ;
predictable and into trade trade negotiation defined and Export Development
transparent negotiations utilized Board
policy and 1.4 : Expand the 1.4.1 Introduce new export finance solutions to 1 01/04/2018 31/12/2022 All five new services introduced Ministry of Fi- Central Bank of Sri Lan- 1,000,000
regulatory export finance improve exporters’ competitiveness. Such new solu- by 2022 : nance ka ; Ministry of Devel-
framework sector to provide tions include : opment Strategies and
Special export credit financing
that supports everything International Trade
• Special export credit financing for SMEs willing to for SMEs willing to engage in
exports. required for a engage in exports. exports.
trade hub • Value chain financing ( especially directed towards • Value chain financing
agribusiness SMEs and farmers’ associations, in ( especially directed towards
order to mitigate price risks ). agribusiness SMEs and
• Bilateral export credit lines and buyer credit to farmers’ associations, in order
minimize risks in new target markets. to mitigate price risks ).
• Export factoring. • Bilateral export credit lines
• Special credit schemes targeting first-time and buyer credit to minimize
exporters as a special group. risks in new target markets.
Funding could be provided through Exim Window of • Export factoring.
development bank. • Special credit schemes
targeting first-time exporters
as a special group.
1.4.2 Set up a development bank, integrating an 2 01/04/2018 31/12/2022 • Development bank set up, with Ministry of Fi- Central Bank of 65,000,000
Exim window to provide exporter-specific services Exim window operational nance Sri Lanka ; Ministry of
and particularly encourage new exporters and small • SLECIC upgraded Development Strategies
exporters. The services in activity 1.4.1. could be and International Trade ;
integrated in this bank. Sri Lanka Export Credit
Simultaneously to setting up the development bank, Insurance Corporation
conduct a review and upgrading of Sri Lanka Export ( SLECIC ) ; Sri Lanka
Credit Insurance Corporation guarantees to reduce Banks Association
the cost of export insurance premiums.
Strategic Operational Activity Priority Start date End date Targets Leading Supporting implementing partners Indicative Link with
objectives objectives implementing costs ( USD ) sector
partner and TSFs
strategies
2 : To 2.1 : Strengthen 2.1.4 Establish a regular standards 2 01/04/2018 31/12/2022 • 10 technical To be finalized by Ministry of Plantation Industries ; Sri Lanka 500,000 National qual-
strengthen the quality update mechanism to align with interna- standards revised Ministry of Sci- Standards Institution ( SLSI ) ; Export Develop- ity infrastruc-
Sri Lankan infrastructure tional standards updates. Support SLSI per year, in key ence, Technology ment Board ; Industrial Technology Institute ture: 3.2.1,
exporters’ to support the standardization committees and stand- sectors and Research ( ITI ) ; Department of Commerce ; Ministry 3.2.2
market-entry compliance ardization units outside SLSI to cater to of Health, Nutrition & Indigenous Medicine ;
and compliance capacity of the needs of key sectors, including a Department of Agriculture ; Coconut Research
capacities. exporting comprehensive standard for social, envi- Institute ( CRI )
companies ronmental and ethical practices. NQC will
lead implementation once established.
See National Quality Infrastructure strat-
egy for more details
2.1.5 Build the capacity of MUSSD to 1 01/01/2018 31/12/2022 • Ten CMCs, Ministry of In- Ministry of Development Strategies and Inter- 300,000 National qual-
fulfil all requirements to include their per year, are dustry and Com- national Trade ; Sri Lanka Accreditation Board ity infrastruc-
Calibration and Measurement Capabili- included in the merce ( SLAB ) ; Sri Lanka Standards Institution ( SLSI ) ; ture: 2.2.1
ties ( CMCs ) in the Key Comparison Data- KCDB Measurement Units, Standards and Services
base ( KCDB ) ( as part of the International Department ( MUSSD ) ; Sri Lanka Association of
Committee for Weights and Measures Testing Laboratories ( SLATL )
Mutual Recognition Agreement. )
See National Quality Infrastructure strat-
egy for more details
2.1.6 Define and provide new accredita- 1 01/04/2018 31/12/2022 • One new Sri Lanka Ac- Ministry of Foreign Affairs ; Export Development 200,000 National qual-
tion services ( e.g. certification of persons accreditation creditation Board Board ; Department of Commerce ; Ministry of ity infrastruc-
– ISO/IEC17024 ; providers of proficiency service per year ( SLAB ) Science,Technology and Research ture: 2.4.1
testing schemes – ISO/IEC 17043 ; prod- • Technical person
ucts, processes and services certifica- hired to support
tion – ISO/IEC 17065 ; reference mate- SLAB
rial producers – ISO 17034 ). Accredit
institutions under the newly developed
services.
See National Quality Infrastructure strat-
Strategic Operational Activity Priority Start date End date Targets Leading Supporting implementing partners Indicative Link with
objectives objectives implementing costs ( USD ) sector
partner and TSFs
strategies
2 : To 2.3 : Create 2.3.2 Expand trade information and 2 01/04/2018 31/12/2022 • Representations Department of Ministry of Industry and Commerce ; Ministry 2,000,000 Boat building:
strengthen a genuine promotion organisations’ collaboration actively promote Commerce of Foreign Affairs ; Board of Investment ( BOI ) ; 3.1.2 ; Well-
Sri Lankan national image with Sri Lanka’s foreign representations. investment Export Development Board ; Exporters Associa- ness tourism:
exporters’ for customers Collaboration areas include : Channeling and trade with tion of Sri Lanka ; Ceylon Chamber of Com- 2.4.1, 3.5.2 ;
market-entry abroad, built of first-hand trade intelligence from target Sri Lanka with the merce ( CCC ) ; National Chamber of Exporters Processed
and compliance on branding markets, including regulatory changes ; help of targeted of Sri Lanka ( NCE ) ; Federation of Chambers of foods and
capacities. and promotion Organisation of B2B meetings with key support materials Commerce in Sri Lanka ( FCCISL ) beverages:
buyers in target markets ; Training and ( brochures, etc. ) 3.7.1 ; Trade
supporting commercial attachés’ on • Information information
promotion of key priority sectors, etc ; channel and promo-
organisation of a globally synchronized mechanism tion: 1.2.2,
event to Brand Sri Lanka, its exports and established 3.1.2, 3.2.1,
investment opportunities ; identification with key target 3.2.2 ; IT-
of ‘fairs’ and commercial events in target markets BPM: 2.1.3 ;
markets related to priority export sectors • Periodical Logistics:
with update of ‘list of events’ in the “ex- event in foreign 3.1.2 ; Spices
port promotion portal”. representations and concen-
In cases where there is no trade attachés organised trates: 3.1.2
in a target market, appoint honorary • Information
councils to conduct trade promotion on about new fairs
behalf of the private sector channeled
to “export
See individual sector strategies and Trade promotion
Information and Promotion strategy for portal”
more details
2.3.3 Build up and organise annual inter- 2 01/04/2018 31/12/2022 • Annual trade Export Develop- Ministry of Development Strategies and Inter- 500,000 Electrical and
national trade fair( s ) in Sri Lanka, inviting fair( s ) organised ment Board national Trade ; Ministry of Finance ; Board of electronic
importers and buyers from all over the and promoting Investment ( BOI ) ; Arthur C Clarke Centre for components:
world to expose Sri Lankan brands. NES priority Modern Technologies ( ACCMT ) ; Exporters 2.1.2 ; Boat
See individual sector strategies and Trade sector. Association of Sri Lanka ; National Chamber of building:
Information and Promotion strategy for • Sri Lankan Exporters of Sri Lanka ( NCE ) ; Federation of 3.1.3 ; Trade
brands promoted Chambers of Commerce in Sri Lanka ( FCCISL ) information
STRATEGIC OBJECTIVE 3 : TO BECOME AN EFFICIENT TRADE AND LOGISTICS HUB TO FACILITATE EXPORTS.
Strategic Operational Activity Priority Start date End date Targets Leading implementing Supporting Indicative Link with
objectives objectives partner implementing partners costs ( USD ) sector
and TSFs
strategies
3 : To become 3.1 : Provide 3.1.1 Carry out a feasibility study ( private sector ex- 2 01 / 04 / 2018 30 / 06 / 2019 • Feasibility study Ministry of Finance Ministry of National 50,000 Logistics:
an efficient adequate perts and University of Moratuwa ) on the necessity of completed Policies and Economic 2.2.2
trade and facilities and installing multi-user facilities to provide tempera- • Recommendations Affairs ; Ministry of
logistics hub systems ture-controlled storage ( bonded logistics centres ). implemented Higher Education and
to facilitate to increase Release of reefer storage, using reefer containers in Highways ; Ministry of
exports the number ports and creation of multi-user facilities, cold stor- Ports and Shipping ;
and quality age, etc. would help transportation and collection of Ministry of Mahaweli
of logistics perishables and the food processing sector, which Development and En-
operations currently suffers a high percentage of post-harvest vironment; Ministry of
losses. Implement recommendations. Lands and Parliamen-
See Logistics strategy for more details tary Reforms
3.1.2 Formulate an action plan to build scale and 1 01 / 05 / 2018 31 / 12 / 2022 • Action plan developed Ministry of Develop- Ministry of National 30,000 Logistics:
volume through key performance indicators and and implemented ment Strategies and Policies and Economic 2.2.3
ensure implementation. For this, all Government • KPI developped under International Trade Affairs ; Ministry of Fi-
institutions related to TF ( SLPA, MoPS ) to develop each institution nance ; Ministry of Ports
and maintain key performance indicators to monitor and Shipping ; Exporters
institutions’ performance and to improve the county’s Association of Sri Lan-
LPI, Ease of Doing Business and Global Competitive- ka ; The Ceylon National
ness Index rankings. Chamber of Industries;
Link to Logistics strategy for more details Ceylon Chamber of
Commerce ( CCC ) ;
National Chamber of
Exporters of Sri Lanka
( NCE )
3.1.3 Finalize and implement the single window 1 01 / 04 / 2018 31 / 12 / 2022 • Single window Ministry of Develop- Ministry of Finance ; 2,000,000
system road map ( currently being completed ) to es- established and ment Strategies and Sri Lanka Customs ;
tablish a centralized system to execute all documents coordination International Trade Export Development
related to foreign trade operations. Align institutional mechanism in place Board ; Department of
foundation legislation to enable institutions to use Commerce
[ Appendices ]
60
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62
[ Appendices ]
64
[ Appendices ]
66
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68
[ Appendices ]
70
[ Appendices ]
72
Photo: ITC
[ Appendices ]
74
Applicable to Lead
Items from 2018 National Budget contributing to NES Indicative value
NES, Sector or implementing
implementation ( Rs. )
TSF agency
88. We will introduce an “Export Market Access Support Programme” All NES sectors EDB 800 Mn
targeting the extension of support to :
• local companies that already have exports of less than USD 10 million per
annum.
• potential new entrants to the export market to better access the global
value chains.
• meeting of the cost of compliance which includes the cost of provision of
free samples, intellectual property registration, insurance and promotional
costs undertaken overseas.
• meeting of the full or partial cost of rent of retail shop space or shelf space
occupied by domestic brands that reach overseas markets for a maximum
period of 36 months.
• Product development assistance to exporters to develop new products
or improve existing products to meet the export market standards and
financial support will be provided through the “Enterprise Sri Lanka” Credit
schemes.
93. National Quality Infrastructure, the testing facilities at the Industrial NQI ITI/SLSI/NARA/ 250 Mn
Technology Institute ( ITI ), SriLanka Standards Institution ( SLSI ), National NQC
Quarantine Center, National Aquatic Research Agency and similar agencies
will be upgraded to be on par with international certification bodies. This will
facilitate our products to be acceptable in the global markets and to facilitate
the proposed import inspection and facilitation scheme.
94. The National Intellectual Property Office will also be upgraded and better NES, Spices -Do- 25 Mn
resourced.
95. In order to meet the growing demand and to facilitate Business to NES BoI
Consumer e-commerce transactions ( B to C ), the BoI and the Customs Logistics DoC
Department will establish a procedure by 1st January 2018, to effect such
transactions.
96. Logistics hub : which includes front end services, Multi Country Logistics SLPA, BOI,
Consolidation, Warehouses, Entrepot Trading and Off Shore Businesses NES Customs
which have immense potential. However, if we are to exploit this potential
in full, certain amendments to regulations will have to be effected. Such
amendments will consist of the liberalization of the existing investment regime
with the inclusion of working capital, expansion of designated areas and
introduction of updated operating guidelines.
97.
• SriLanka Ports Authority Act, No. 51 of 1979 and the Merchants Shipping
Act, No. 52 of 1971 will be amended to cater to the demands of the modern
day logistics and marine industry.
• An independent Ports regulator will be introduced.
• Restrictions on the foreign ownership on the shipping and the freight for-
warding agencies will be lifted. This will enable major international shipping
lines and logistics operators to base their operations in SriLanka.
98. The Government will drive a comprehensive “Multi-National Corporation EEC EDB 25 Mn
Outreach” programme ( MNC Outreach ) to attract global Electronic and
Electrical Machinery ( EEM ) players into the country to create value chain
linkages or joint ventures with SriLankan EEM exporters.
100. The EDB, supported by institutions such as SriLanka Customs, TIP EDB 25 Mn
Department of Commerce etc., will establish a trade portal ( E Export
Promotion portal ) that will allow the exporters to access reliable trade
information on time and trade promotional tools including trade statistics,
regulatory requirements, export/import procedures etc.
101. The COSTI will be converted into the National Science Technology & NES Ministry of Science, 25 Mn
Innovation Coordinating Authority ( NASTICA ) which will be dedicated to I&E Technology and
convert research into commercial ventures Research
Applicable to Lead
Items from 2018 National Budget contributing to NES Indicative value
NES, Sector or implementing
implementation ( Rs. )
TSF agency
102. “Innovators to Industry ( I2I )” initiative. I&E Ministry of Finance
The “I2I” aims to connect university graduates and NVQ 4 certified graduates and Mass Media
for a registered patent or a viable business idea with the industry. ( Industry will
adopt the Innovator ).
The Government will bear :
• the monthly salary, i.e., 50 % up to a maximum of Rs. 50,000 per month for
a period of 24 months, and
• the cost of patenting in Sri Lanka and counsel on patenting
103. PDE initiative through the Mechatronic Enabled Economic Development EEM Ministry of Science, 350Mn
Initiative ( MEDI ) which will consist of the shared services in Standards, IT-BPM Technology and
Training, Prototyping and Test Facility ( SPTF ) and the Long Term Loan Facility BB Research
( LTLF ).
105. The boat building industry has been identified to have significant BB EDB 100 Mn
potential as an export industry while paving the way for nautical tourism. As
such, we will introduce the necessary regulations to facilitate this industry to
grow, including the introduction of a system for standardization and quality
assurance and, will also create dedicated industry zones in Trincomalee and
Koggala, facing the waterfront. We will exempt the upfront payment of NBT
and PAL applicable on the sale of yachts built by BoI companies to the local
BoI charter companies.
106. The country still has a competitive advantage in the spice and Spices -Do-
concentrates industry. Our support will be as follows :
107. Stringent regulations will be imposed to ensure good quality products
protecting the SriLankan identity.
108. The Cinnamon and the Pepper industry will be supported for value Spices Ministry of Primary 50Mn
addition and to increase production, by providing incentives to increase the Industries /
production of high quality planting materials in 1,000 nurseries. Department of
Export Agriculture
109. Activities will be strengthened at the Cinnamon Training Collage. Spices EDB 50Mn
128. The para-tariffs imposed on certain imported food and beverages will be
removed. ( The list is included in the Technical note ).
138. The EDB together with the SLTDA will invest in the development of a PF&B Ministry of Tourism
“Branding SriLanka Cuisine” initiative. NES Development &
Christian Religious
Affairs
146. We will also introduce av integrated Land Registry ( eLR ), digitized 45 NES ( land bank ) Ministry of Lands 150Mn.
Land Registers, & Parliamentary
Reforms
146. We will also introduce and establish a National Single Window NES Ministry of 325Mn.
connecting 31 State agencies with the Customs Department. Logistics Development
Strategies and
International Trade
151. If “Enterprise SriLanka” is to succeed, … NES Ministry of National 2,500Mn.
• “Market Oriented Vocational Training” IT-BPM Policies and
• Invest in developing vocational training institutions to develop high quality BB Economic Affairs
market oriented training programmes. EEC
Supported by “Employment Preparation Fund” Logistics
Wellness Tourism
176. Will support the Colombo University’s initiative to collaborate with the IT-BPM Ministry of Higher 250Mn
industry needs and venture into new streams such as Data Science, Big Data Education &
analytics, Actuarial studies, Business analytics etc. Highways
177. The Vavuniya Campus of the Jaffna University will also be strengthened
to include a state of the art library facility and an IT center.
206. A comprehensive food hygiene and food safety system will be developed NQI Ministry of 25Mn
in collaboration with the relevant line agencies. P F&B Health, Nutrition
Spices & Indigenous
Medicine
[ Appendices ]
76
Applicable to Lead
Items from 2018 National Budget contributing to NES Indicative value
NES, Sector or implementing
implementation ( Rs. )
TSF agency
269. The Government will support, by way of grants, selected small industries P F&B Ministry of 1,000Mn
throughout the Northern Province by empowering the vast network of Spices Prison Reforms,
Producer Cooperatives in the Province. Rehabilitation
Resettlement and
Hindu Religious
Affairs
270. We will also establish 2 food processing centers in Delft Island and P F&B Ministry of National 40Mn
Kilinnochchi, specializing in Sap based produce such as Palm Juggery, Integration and
Palmyra fruits and Tuber processing, respectively. Rehabilitation
285. The Consumer Affairs Authority will be strengthened to protect the NQI Consumer Affairs
consumer from price and quality manipulators Authority
287. We will introduce new legislation to replace the 148 year old Customs NES Customs
Ordinance to meet our commitment to liberalize trade with the necessary Logistics
safeguards. In line with the objective of ensuring a paperless clearing system,
acceptance of digital signatures for electronic documents will be in operation
soon.
Photo: © advantis.world
Provide high-level guidance relating to the overall NES Support the NES Navigator and Core Team for successful
design and implementation process. completion and endorsement of the NES.
Collect, centralize and preserve all archives and docu-
NES Navigator – State Minister of International Trade mentation related to the NES design process.
Identify and mobilize relevant public and private stake-
Lead the process of NES design. holders to be involved in the design of the NES.
Ensure the process is highly consultative, with con- Organize national, sectoral and regional meetings re-
tinued communication with and between all relevant quired to ensure an inclusive and participative NES de-
stakeholders. sign process.
Secure the engagement of the public sector, private sec- Organize communication and outreach efforts to promote
tor and civil society representatives. the NES as a key driver for national development.
[ Appendices ]
78
The Harvard Centre for International Development, Commonwealth into new industries due to the sophistication of existing
Secretariat and ITC have all employed statistical techniques to de- industries.
termine the export potential of Sri Lanka’s industries. The findings • The Commonwealth Secretariat assesses existing flows and,
overlap for some industries but differ for others. A brief explanation based on this, looks at extending the flows into new markets
of each is provided below. or intensifying trade in existing markets.
• The Centre for International Development focuses on existing • ITC analyses the dynamics of growth and performance of
trade patterns to explain the ability of a country to move trade, but also market access conditions, and also uses a
product space approach for moving into new sectors.
Table 1 : Number of products identified per sector at Harmonized System 6 level with export potential
Commonwealth Harvard Centre for International
Sectors ITC
Secretariat Development
Tea 2
Rubber and rubber-based products 3 7 3
Apparel and textiles 13 2 17
Fisheries 3 2
Fruits, vegetables, crops 2
Electronics and machinery 5
Insulated wires 4
Printed circuit boards 3
Diamonds, gems and jewellery
Coconut-based products 1 2
Spices and essential oils 2 2
Boating industry 2 7
Food, feed, beverages 2 2
Chemicals and plastics 2 3
Wood, toys, gifts, handicrafts and handloom 1 1
Footwear and leather 1
Ceramics, porcelain, glass, sands, metals and minerals 5 3
Other products 3 3 3
Paper, printing and packaging
Source : ITC ; Harvard Centre for International Development ; Commonwealth Secretariat, 2016.
Note : The numbers in the table represent the number of products identified as having export potential at the Harmonized System six-digit
level. No numbers mean no products were found to have a potential in that sector.
ADDITIONAL CONSIDERATIONS
CRITERIA USED IN THE SECTOR FOR FOCUS SECTOR SELECTION
SHORTLISTING EXERCISE
In addition to the above parameters, the public–private
stakeholders at the NES first symposium in April 2017 were
Summary of criteria used Additional criteria used asked to consider the following dimensions when ranking
by the export performance in the public–private
sectors.
assessments consultative process
[ Appendices ]
80
The Strategy implementation time frame also strategies are driven by strong private sector ownership and
dictates the sectors to be included build on the sectors’ competitive advantages.29 While these
sectors are the backbone of Sri Lanka’s export performance,
The NES is a medium-term strategy as far as the vision innovation and export diversification are needed to comple-
and strategic objectives are concerned, with strategic PoAs ment these existing star performers.
framed to be implemented in five years. As such, the NES
needs to be focused on a few sectors that can be effec-
tively upgraded during the implementation period. The next Contribution to innovation and export diversification
NES – after the five-year time frame has elapsed – will al-
low the selection of new focus sectors that became ripe for This NES provides a road map towards a more innovative,
export growth. diversified and resilient export sector through the promotion
of focus sectors that do not yet contribute significantly to
Sri Lanka’s exports but have high potential to achieve inter-
Institutions must evolve in parallel national competiveness over the coming five years. This is
also in line with the vision and the fourth strategic objective.
Institutions remain fundamental to the success of any sec- Sectors that are active in R&D and innovation can function
tor development. Sectors that are better organized through as best practice examples for other sectors.
unions, cooperatives and sector associations stand a better
chance of steering the NES implementation to ensure the tar-
gets are achieved. The presence of organized support pro-
vides a favourable framework to build consensus and bring
the sector to the next level of sophistication. 29.– The rubber sector has the Sri Lanka Rubber Industry Master Plan
2017–2026 and the textiles sector is currently in the process of developing
its own new sector strategy. Similarly, the coconut product industry has
its own sector Strategic Plan 2016–2020 supported by the Coconut
No replication of existing strategies Research Institute. Moreover, many products belonging to the coconut
product sector, such as coconut oil and desiccated coconut, are covered
Established export sectors such as apparel, tea and rubber in the Processed Foods and Beverages Sector Strategy. Other important
sectors with high export potential, such as the fisheries sector, are already
have proven their ability to compete in world markets. Their receiving strong support to develop strategically.
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